In the mid 90’s Bart Simpson sold his soul to Millhouse for a mere $5. After a series of calamities he realised that life isn’t the same without a soul.
Fast forward twenty years and it appears that brands haven’t learnt a thing from the world’s favourite animated bad boy.
Walk into any supermarket and you’ll be slapped across the face with an array of specials, markdowns and 2 for 1 deals, but does selling your brand’s soul to make a quick buck really pay off?
As a shopper who can resist a bargain? As a brand, however, does it actually increase the sales of a product?
The simple answer is no. By discounting your product you are cannibalising your future sales, training customers to only buy on sale and devaluing your brand.
How does this work? When a product goes on sale, people will purchase it at that discounted price, not full price. You’re giving away discounted product to people who probably would have bought it anyway, therefore eroding revenues.
If a brand of toothpaste goes on sale, for example a two-for-one special, people will buy more than one tube meaning they won’t need toothpaste for a longer period of time. No matter how cheap the toothpaste is, people are not going to clean their teeth more often. Discounting gives away product that would have been purchased in the future, it doesn’t increase overall sales.
Discounts also impact the way customers perceive your brand. Slashing prices gives them the perception that your brand has lower value, it also turns the conversation away from product benefits and providing need solutions and solely to price. This trains your customers to expect discounts and to only buy from you when you are on sale.
Three things build brands and increase sales:
Have a good product: if it’s a bad product people won’t buy it.
Be well remembered: with memorable advertising and communications, extract intangible value and tell people what makes your product great.
Well distributed: make sure your product is available for sale absolutely everywhere.
Price promotions don’t work.