Think before you discount

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on Aug 4, 11 • by • with 3 Comments

Until recently, “social media fatigue” has been the most dangerous “condition” that we social media marketers have had to combat.  Now, however, with the recent trend toward frequent deep discounts and coupon offers, we are risking an even more serious condition of “offer fatigue.”

Social media fatigue is of course of concern to social media marketers, but I think it will continue to be seen most often as simply an unfortunate side effect to the incredible advances that social media has brought to human connections and access to information.  Offer fatigue, on the other hand, has serious consequences for our brands.

Using coupons in a digital world the same as they were used in traditional distribution is very dangerous to brand equity.   Constantly discounting a product through frequent couponing or huge deal discounts on products  – and especially services — destroys brand equity and lowers perceived value.

Consider a service such as Groupon, which offers coupons for substantial discounts of its clients’ products and services.  Great news for customers, but not so great news for Groupon’s clients.  As many understand,  Groupon is not an ecommerce business – its value is in lead generation… but I’m not sure these “leads” are as valuable as Groupon clients may think.

While there is of course great value in catching an initial sale from an otherwise inactive shopper, the challenge shows up when we try to build an ongoing relationship with this “hot” lead.  They will continue to expect these deep discounts, because they will see those discounted prices as the actual value of the product or service. It is extremely difficult to turn a workable percentage of those ‘lost leader” buyers into profitable customers and have a metric that covers the upfront investment.   In many cases, it is easier to gain a repeat buyer through moderate discounts and infrequent coupon offers.

One way to think of it is that many brands are beginning to suffer from the delivery pizza effect.  A $15 pizza is now worth $10 in the eyes of most consumers because of constant discounts, 2 for 1 coupons, etc.   Offer a discount often enough and that lower price becomes the expected price… and, in the consumer’s mind, the actual value.

“Coupons create new trial. As a mom I love the satisfaction of knowing that I saved my family money by using coupons. By using a coupon I am in control of my budget not the retailer,” commented Social Fabric® member Melissa Garcia of ConsumerQueen.com. “If brands were to take coupons away and only go for low price that might work for awhile but eventually the low price becomes regular price in my mind. So your back to square one.”

Brand equity is seriously at stake here.  We marketers need to band together to preserve the ability to be recognized and compensated for the true value of our products and services.  Don’t get in the game of over-couponing, under-bidding and de-valuing.  Please, discount responsibly.


Originally posted at Collective Bias

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3 Responses to: Think before you discount

  1. Yep, every time I see a coupon, I think to myself: “This product is overpriced” and look for alternatives.

    I’ve actually considered making an anti-discount site that listed stores that did not accept coupons and did not mark up products to have deep sounding discounts.

    Of course, this is why so many people shop Wal-mart.

  2. Paige Worthy says:

    Yes.
    Yesyesyesyesyesyes.

    Beyond that, it breeds a culture of consumers who aren’t just expecting deals but who are flat-out cheapskates. They’re like locusts, abusing one business until they’re sapped then moving on to the next. They’re rude to their restaurant servers, they spend just the amount of the voucher and never come back. Not everyone is like this, but it’s fostering badwill (the opposite of goodwill?) all over the place.

  3. Hey Ted,

    You absolutely nailed it when you said “brand equity is at stake”. I’m afraid far too many retailers don’t see that side of the “daily deal” equation.

    And speaking of Groupon, here’s something (below) I posted just today re: Groupon and includes a very interesting Q&A I had with someone with a lot of knowledge about Groupon and daily deals…

    Why Groupon May Not Be Right For All Retailers http://t.co/mTVnOb3

    All the best my friend!
    Steve O

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