Discounting products or brands?

There are certain products that you know, cost what they cost. Let’s use Apple as an example, if you want a MacBook Pro you pay what’s on the price tag. And there is no point waiting for Christmas sales or the next model to come out, for as long as that product is available it is going to be that price.

Now, what about your favourite clothing brand? Let’s use Country Road as an example (Men, woman and children clothes, covers most of the bases). You can certainly pay full price for new season stock, or you can wait for a Spend and Save, a 25% off promotion, even an end of season sale. I mean it is undoubtably considered good marketing to maximise profitability of a product by dropping prices when a product is coming to the end of its life cycle. However, what about when budgets are looking like they might not be met, or a competitor is going hard on their own promotions; a sale promotion is a silver bullet solution that will bring in some much needed sales. But what does this do to the perception of the brand, and the behaviour of the customer.

country rd

My co-workers and I are pretty loyal Country Rd customers, but can I tell you not one of us would pay full price. We aren’t price sensitive, we just know that next week there is going to be some sort of promotion…and that means we can get that extra top we have been eyeing off! Plus there is the old fear of missing out…what if I buy today and it goes on sale tomorrow!?!? I mean chances are it will. Has Country Road decreased the value of their brand by running more than just the end of season sales?

mac

In contrast, when a new Apple product is released there is no waiting for a sale. You just take yourself down the store and buy with confidence, knowing that you aren’t missing out on an upcoming promotion. Looking within the same category, if you were in the market for a Toshiba or Dell computer would you search for the best deal? I would hazard a guess and say yes. Is this how Apple has created such consistent demand for their product by making the statement ‘we believe in our product, and don’t need to discount it’.
So what does discounting do to the perception of the brand in the customers mind? What does that mean for the way the customer behaves when purchasing the product? Are you discounting the product or discounting the brand?

tos

If Country Road was to drop their everyday prices would they get more sales, or would sales drop because their customers aren’t getting that special feeling from picking up a good deal on an aspirational brand. Would Apple maintain their monopoly if they discounted their product, or would they increase market share by becoming accessible to other segments of the market? For us promotions certainly have their place and are a valuable tool for positioning a brand or making the most of a products life cycle. However like any tool, if you don’t know how to use it you might just do yourself some damage.

What about you, do you wait for sales? Do you feel cheated when you by something and it goes on sale the next week? Does a brand that doesn’t give discounts give you more confidence in your purchase?

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15 thoughts on “Discounting products or brands?

  1. Very Interesting Blog…
    A definitive leader is the shopper.
    At the point when a brand ceaselessly rebates its merchandise or administrations would you ever like to pay the maximum for those same products when they aren’t discounted? Each time I visit New Delhi (My Hometown) they are having a deal and its typically a generous one with rebates of 50-70% off. The maximum on the tag has gotten to be futile to me on the grounds that I realize that this must be swelled to check their persistent rebate technique. This abandons me never needing to pay the maximum in light of the fact that I know there will be a deal heading up.

    Just think of the Pizza price wars, when brands such as Dominos and Pizza Hut started lowering their pizza prices consumers were no longer willing to pay full price so the discount strategy had to remain in place. Discounting erodes the value of your brand in the minds of your customers. It devalues the price that a customer is willing to pay.

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  2. To be honest, I find it frustrating that Apple never has sales, it also makes me wonder what they do with the inevitable stock they cannot sell, as a new product becomes available and the older version still remains at the same price.
    I also believe that the inelasticity of the demand for Apple products, essentially people want the products more than they have issue with the price tag, is driving their sales, so you know what they say if it isn’t broken… But, will this last forever, or as Apple as we know it today, progresses through the business lifecycle and its demand starts to plateau will they change their policy?

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  3. I think providing discounts after a considerable period time wont effect the brands image but if a brand keeps on introducing sales one after the other it gives a negative signal that maybe the company is not able to generate enough sales to support itself maybe due to lack of quality or some other reason. so giving out discounts should be implemented
    very carefully.

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  4. Interesting. As I was reading your blog I was thinking about supacheap auto in Australia. The offer membership program where if the item you buy goes on sale a week or so from you buying it the provide a store credit for the difference. Is this a way of smoothing out cash flow whilst limiting the impact of sales undermining the ability to pay full price. Would consumers not delay a purchase in hope or expectation that it would go on sale and conversely feel a added bonus when they are advised after the event they go something extra ( a store credit). In that way a sale could be perceived as an added benefit rather than a discount on price.

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    • Thanks for your thoughts. Seems like a very clever system Supacheap have employed. They are able to protect their relationship with their more price sensitive customers (that they might have otherwise lost), while enticing them to come back in store to spend more. As their brand position is value -based I imagine this would be critical for them. Where as Country Rd is a aspirational brand, I question if the amount of discounting they do doesn’t erode the value of the brand to their customers.

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  5. Why pay full price if you don’t have to? And I agree with first comment – power is with the shopper. I don’t give any consideration to the brand eroding it’s value by discouting an item & I’m probably not the only one. My daughter is an op shop shopper & got a new pair of Guess jeans (with tag still on) for $10! Has the Guess brand lost its value because she didn’t pay full price & bought it in an op shop? No one else knows, so I don’t think it does. I too would love know what Apple do actually do with the stock they sell, but then again what is the profit margin & does this factor in items not sold? The Supercheap Auto store credit example, I think is more about luring you back into the store to spend your money there & into becoming a loyal customer.

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    • Interesting point. As a casual observer I don’t know how much your daughter paid for her jeans…all I know if that they are Guess, which is regarded as a quality label. However if Guess was synonymous with continuously discounting their product, that might change the value I put on that label.

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  6. I personally always wait for a sale. I do a lot of my clothes shopping at Myer, and there are so many sales (end of season, mid-season, special discounts, etc.) that there is nearly no point in buying something at full price. The only danger with this is the possibility of something in your size selling out, but you can always rationalise this as ‘it was too expensive anyway’. Shops like Myer carry so many of the one item, that as their stock gets older, it’s a danger not to put items that still have a large volume on sale – what would happen if you had too many items for those willing to but end-of-season stock?
    I think if stores, particularly in the clothing market, chose to permanently mark down their stock, they would be hurt in three ways. Firstly, they would lose the extra money made through the initial full-price sales – these purchases are made regardless of the initial higher cost. Secondly, it would be difficult to attract shoppers who purposefully look for stores with sales in order to do their shopping – they would no longer brows the racks looking for that one great item a deal price, because their perception of value would be skewed; they would automatically associate that garment or store with a lower quality due to the lowered price, and would therefore adjust there opinion on the worth of the product, believing that the cost is more than the worth. Thirdly, the store would then have their associated reputation and value lowered to align with the lowered cost of the products. Stores that once had higher prestige would then be lowered and no longer remain in the same targeted market – think about David Jones or Myer becoming synonymous with Target and Big W!

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  7. Well written and very interesting view on how two very different companies look at pricing of their products. Its probably also worth considering that Country Road have to cycle their stock more regularly than Apple would, hence are required to sell their out of season stock at sale price, where as Apple would only look at replacing their Mac book every 3-4 years. This would allow Apple to control quantity of stock world wide, ensuring that the numbers have reduced before making an announcement of a new model… Food for thought

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    • True…the very nature of their product requires different pricing strategies. With longer life cycles stock control would be a lot easier to forecast and manage (different at the launch stage I imagine). I guess what we are questioning is the amount of additional discounting Country Rd do, aside from their end of season sale, which is just good business and standard across the industry.

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  8. Agree with the comment above. Country Road products have to be replaced every season. Demand for for summer clothing is declining towards the end of summer and Country Road needs to start supplying for winter clothing by then. Discounting, for Country Road, is the most logical route to take so that they can increase sales for the old products (and reduce their stocks as well) closer to the final phase of their life cycle. Apple, obviously, has adopted different strategy. Older generation iphones (iphone 5S & iphone 5C) are still being sold on their original prices. This marketing strategy is probably adopted to keep customers perception of Apple being a premium brand. After all, higher costs are associated with better quality.

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    • Exactly what we were thinking. If the perception is the cost equals the quality, does continuously discounting reduce the perception of the brand? Understandable that they would make the most of the products lifecycle by reducing at the end of the season, but the other sales/discounts are possibly eroding their brand position.

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  9. I never wait for a sale but if I’m purchasing I have a sense of satisfaction if I can pick up something at a discounted price. The exception would be for more expensive item I’ll do some research and have a look around to see if there are any sales. I’m not particularly loyal though and wouldn’t necessarily return and pay full price.

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  10. Thanks for reminding me of these things 😀
    As an Apple user, to be honest i would say that your opinions are truly right. Privately, i don’t feel like really wanting any discounts or sales on buying this huge products company. once again, no doubt for me to purchase, no such a suspicious in my thought regarding the quality of the products. However, i’m still happier if there’s a discount or sales that promoted by the company.
    in the other hand as my experience, honestly i’m feeling exactly the same as you’re writing above when i’m missing discounted-stuff then it goes on sale a day later. It happened a few weeks ago, as Coles has weekly change sale-prices (every Wednesday), i bought some stuffs there, then in the following day, it went on sale.LOL. it was so hurting me. 😀
    Sometimes “DISCOUNT” does reduces the stuff value as some people assume. But for another case, doesn’t decrease its values, it depends on the level of its luxury as well as its necessary.
    Anyway,it’s very good thoughts !

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  11. Great article, a lot of good points.

    I agree that a lot of brands do themselves a disservice by too often having discounts. For some brands I think you would have to be mad to pay full price as the sales are so constant. the constant dramatic reductions makes be question the value of the product – if Review or Alannah Hill can sell all their dresses for $100 off and still make a profit – makes me think that it was never worth much to begin with and was probably cheaply made.

    Apple is massively overpriced but I agree with the OPs observation that we can always go to the Apple store and pay full price with confidence that we are not missing out on a cheaper deal elsewhere. In a world full of constant assessments as to price and value, this is a calming and attractive thought!

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