Black Friday is the day many brands offer discounts. Strong brands, like Apple, never discount the core products.
For companies, sales discounts are a great way to boost short- term sales. It is an approach with guaranteed success. Even people who do not need the product right away might buy because of the great discount. Like with everything, there is a flip side to discounts.
1. Postponing purchases
Consider carefully discounts for products that are not fast- moving consumer goods but substantial investments for consumers. Consumers can often wait to make the purchase when it is not highly necessary. It is not uncommon for people to sleep on the old bed a few months longer and wait for a good discount.
2. Creation of artificial purchase cycles
Some companies run discounts during specific times of the year. When consumers know about the cycle, they will wait for the following discount round. The brand has unwillingly created an artificial purchase cycle.
FujiFilm is a company with artificial purchase cycles. The company runs pretty steep discounts on its cameras and lenses in spring, summer, and winter. People who are in the FujiFilm camp make purchase decisions three times per year. If the desired products are not on sale in the current round, chances are the dream kit will show up in the next round.
3. Abandonment of retail prices
Discounts reduce the suggested retail sales prices of products in the mind of the consumer. Once buyers have seen a printer in a special offer for US$69, they won’t pay the US$99 suggested retail price ever again. Getting the product cheaper has now become a real possibility. The discount helped the short-term sales but made the brand and product positioning weaker.
The alternative to discounts
The best alternative to discounts is to provide perks around the core product. For example, a brand known for its leading Music composition software should not discount the core product, the What of the brand. Instead, it should provide extra perks around the core product like giving a plug-in or sound bank for free.
Apple follows this strategy. The company hardly ever gives direct discounts but turns discounts into Apple Gift cards. Of course, the Gift Cards are to be used in the Apple Stores.
Perks are a great way to give people ‘a good deal’ while in their minds, the value perception of the core product has not changed.
This post is taken from my new book Win With What – the first category-led growth book.