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On Cheapening Your Brand

Price Cutting BrandThe more traditional school of marketing thought is that price cutting cheapens your brand.

Maybe so.

Yet, at Bob Evans, we’ve instituted a value menu for the first time in company history, driven by the needs of our restaurant guests.  That decision was not come to lightly either, but it’s working.

This year, retailers everywhere relied heavily on discounting to drive sales during the holidays. Not that that doesn’t happen every year, but it was BIG in the retail recovery of 2011.

Karah Joy sent me this article earlier today on how the New York Times botched a discount program by sending a 50% discount offer meant for a small list of unsubscribed readers to 8.6 million list members. OUCH! That’s a steep price cut that they may have to honor, at least for those who make a big deal out of the mistake (no pun intended).

The Question for You

In the wake of the disastrous economy of the past few years, can you really still cheapen your brand through discounting your products and services?  Or, is this a mechanism of survival driven by lighter consumer pocket books?

Do you believe that price cutting still cheapens your brand?

  • http://about.me/matthewrusso Matthew Russo

    NPR recently aired an interesting piece about the “sale” mentality many shoppers now have at Christmastime. Our weak economy has fueled consumers’ desire to seek out a “good deal” over the past few years – and many retailers are now playing to this, knowing their customers won’t buy unless they see a “40% OFF!” sign.

    These (seemingly) deep discounts are one of the driving factors that make private sale sites so exciting. Premium goods at highly discounted prices helped early sites like Gilt and RueLaLa generate buzz and garner an air of exclusivity. And for a while, members truly were getting a deal (Versace dresses for 80% off, etc…)

    The problem now is that consumers aren’t really getting a deal in the traditional sense. Once the demand surpassed the supply (low-run, high-ticket items), manufacturers started building in plenty of profit into their “sale price” and offering them to the public. 

    In its simplest form, a product or service is what the market is willing to pay for it. If a brand can portray value to its customers without calling it a “sale,” I think that is the best way to go. But if your customers need to feel like they are beating the system before deciding to buy, I don’t see anything wrong with cutting prices so long as your company can still make a profit.

    Groupon is a different story, but my comment is already long enough… ;)

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  • http://nateriggs.com nateriggs

    @MatthewRusso:disqus I think you have a good point. At the end of the day, companies are out to make as much margin as possible and if a sale can be engineered that does not effect the margin, or even increase the total ticket, then it’s a go.

    That said, the sale is then a fallacy anyway, based on a past market price that most consumers are unwilling or unable to pay. Over time then, I guess there is not really an effect on brand. Discounting has become the norm…

  • Anonymous

    I believe it depends on the brand that you’re trying to build Nate. 

    If you’re working to create a luxury brand, then yes, it will damage your brand. 

    But if you’re trying to communicate that your brand listens, understands and cares about your community/customer’s monetary pain, then no, it won’t damage your brand. They’ll love you for it because it will resonate with them.

    • http://nateriggs.com nateriggs

      Totally agree there.

  • http://www.brainzooming.com Mike Brown

    When it comes to discounting, we recommend looking at it in creative ways so that a brand is asking for something in return for the discount. It’s a great opportunity to do a steeper discount for a consumer sharing information or signing up for an email or newsletter or sharing opinions. In that way, you recognize value in the relationship and what the consumer is willing to do to help preserve the original price point for your product or service.

    • http://nateriggs.com nateriggs

      Amen to that idea. You could make a case that this approach to discounting actually strengthens the brand by igniting vocal ambassadors too

  • http://twitter.com/JimJosephExp Jim Joseph

    Price discounting won’t cheapen the brand if it’s done appropriately.  Meaning that it has to match the brand equity and be done to serve the consumer.  Happy New Year!  Jim.

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  • http://twitter.com/patrickreyes Patrick Reyes

    Interesting post, Nate.  As someone that has been in the automotive industry for pretty much my entire career, I’ve seen how deep discounting can have a damaging effect on automotive brands.  There are some that do it correctly and strategically.  There are others that “event” after “event” after “event” is the way to go.

    I think if you offer a strong value proposition to the consumer, you can use sales and discounting in a manner that doesn’t damage the brand.