How to Discount Wisely

In troubled economic times, many retailers react to declining sales by discounting. This could be a slippery slope. Retailers should carefully consider their discounting strategies before cutting prices. Writing in Business Week, Steve McKee offers three tips on how to discount wisely:

1. Discount briefly: “Discounting is like a drug. Employed for a limited time to treat a specific condition, discounting can have its place. But like a drug, it’s addictive. Companies that get hooked on it do little more than drive their value proposition down, sometimes past the point of no return.”
2. Discount credibly: “Handled carefully, discounting can be used to achieve specific business objectives without compromising your brand’s overall value perception. The key is to make the rationale behind the discount credible (and obvious) to consumers, so they don’t perceive it as an act of desperation.”
3. Discount creatively: “Smart companies understand that price is just one element of the value equation, and find ways to “discount without discounting” by focusing on other elements of the marketing mix.”

McKee provides real world examples for each of these tips. They are worth the time. You can read the article here.

Before just slashing prices, ask yourself if the price cut will only benefit short term sales at the expense of the brand in the long term.