Today as I write this, it is Cyber Monday. The day we all return to work, sit down at our desks, and shop till we drop. 70% off. Buy one get one free. Free 2 day shipping. Bargain shoppers salivate at the thought of deals to be had.
So what did my business offer customers for this national retail holiday?
0% off.
That’s right, absolutely no discount at all. Are we missing out? I don’t think so. Let me explain the 5 reasons we shun discounting, and why I think you should too:
- They attract the wrong kind of customer: One of most valuable insights I learned from my days as a marketing analyst is that discounts attract the wrong kind of customer. What exactly is the right kind of customer? Good customers shop frequently, and without the need of incentive. They believe in your brand values, and appreciate your product for what it is. They don’t need bribes to purchase it. Discounts inevitably attract customers that will only ever shop when you have discounts. It’s simply a myth that promotions are an inexpensive way to acquire customers who then come back and buy full price items later. Discount shoppers buy discount merchandise, simple as that.
- They create a future expectation that’s impossible to fulfill: Discounts are addictive. Sure, you only start with 10% off. Maybe you even inflate your retail price to make up for it. But then when sales lag you sweeten the deal to 15% off, then 20%. Before you know it, you’re bleeding margin in order to attract and retain customers. We all intuitively know this is true. We wait late into the Christmas season because we know the deals will get better and better and retailers get more desperate. Don’t fall for this trap.
- They simply shift sales from one period to another: Oftentimes business owners get a false sense of the benefit of promotions when looking at their sales data. Inevitably, every time you offer a discount, your sales spike. However, what’s hidden in this information is that fact that you often steal sales from the future that would have happened anyway. For example, suppose you offer aggressive discounting in early November, before the Black Friday/Cyber Monday discounting week. You’ll likely see a huge bump in sales, however a good portion of these sales would have bought later in the month, and you simply shifted the sales backwards, with no net gain.
- They devalue your product: What does it say to your customer that you are able to lower the price willy nilly on your items? It tells them that they were overpriced to begin with, and you probably are overstocked and no one is buying.
- They take the focus off what really matters: your brand and your “why”: Discounting strategy is the tail wagging the dog. Think of all the meetings your team has spent trying to lay out the perfect promotions. All the planning, all the markdowns, all the creative that had to be designed. What if all that effort went into new product development, customer service, or developing your brand?
While I mentioned that our business offered zero discounts this Cyber Monday, that doesn’t mean we did nothing. Instead, we shifted the attention back to our brand values, and what our customers care about most. Last May we launched a program with RescueBank that feeds shelter animals through the purchase of every item. Instead of discounting, we doubled our normal donations from Black Friday through Cyber Monday. This put the emphasis back on our “why”. The result? Absolutely stellar sales, more funding for a cause, and no devaluing of our brand. I encourage you to ditch the crutch of discounts. Years from now, your business will thank you for it.
Challenge: Think about the brands you passionately love the most. How much or how little does discounting play into their strategy? Leave a comment below.