Discounting: Is it deadly, a dangerous drug or both?

“From the earliest days of retailing, merchants have rewarded customers with perks, to build loyalty. However much like the insidious effects of drugs, price discounting destroys you, your business and your brand. Let’s see why.

I’ll be honest, I don’t like discounting. Why? It’s distracting. It’s demeaning. But most of all, it’s destructive. And yet it’s the tactic of choice in the hair industry, when business gets tough. Even brilliant brands – who should know better – are not immune to its allure.

Yes, it is true, that when things get tough, you’ve got to take measures and discounting seems to offer the easiest, quickest fix to turn around your short-term cash problem. However, its flip side is a long-term downward spiral. Why? Because in the short-term, more customers may come through the door but they won’t stay when the deal disappears. They won’t see (or feel) the value.

So you have to repeat it. Again. And again. And it goes on…

Discounting is habit-forming and addictive, but worse still, it eats at the heart and soul of your brand – it destroys the brand equity of your product or service. What’s that? Here’s a quick definition:

Brand equity is a phrase used to describe the value of having a well-known brand. Common measures of brand equity are: brand awareness, brand loyalty, perceived differentiation, market share and finally, the price premium the brand can command over unbranded products in the same category.

Brand equity is the ‘emotional margin’ of your brand – it’s the valuable, heartfelt bit – or as Warren Buffett once famously said, “Price is what you pay. Value is what you get…”