Don’t we all just love when our favourite brand announces a sales discount or offers a price reduction on its merchandise? But have you ever wondered what’s the long-term effect of discount offers on customer experience or on the brand itself for that matter?
Just last week there was a huge sales discount on a fashion brand that has been my wife’s favourite for quite a long period of time. You’d think she must have been ecstatic, right?
Well, of course, she would have been excited to know – but only if she had found that out before paying the full amount.
She had been eyeing some clothes and accessories in the brand’s latest summer collection, hoping they might hold a sales promotion soon as the warm summer months were nearing the end. But after waiting to no avail, she finally did some shopping, spending well over £300 and lo and behold!
The very next day she receives a promotional message from the company offering a 20% discount in the price of all the items in their store.
I am pretty sure you have experienced a similar situation at least once in your life, haven’t you?
But before elaborating on the effect of discount offers on customer experience, let’s take a look at what price reductions signify about the overall performance of the business in its respective industry.
Discount Offers and Business Performance
Sales discount attracts more buyers which, in turn, drives up the total sales revenue. So, in other words, sales discount equals greater income and thus, more profits for the business.
Is that what you think?
If you have a similar viewpoint, you are partially right. The complete truth is that sales promotion does not necessarily translate to increased revenue for the seller.
Businesses that have sales all the time are not performing as successfully as you might imagine. In fact, more often than not, sales discounts are solely meant to help the company sell out the good and services that it couldn’t sell otherwise.
Discount pricing is often one of the first and foremost strategies that businesses adopt when they are on the brink of failing or experiencing cash flow problems. It can also indicate the company’s struggle to occupy a prominent place in the public eye and the problems it might be facing in capturing a significant share in the market.
If you live in the UK, the proof is right before your eyes. Consider the numerous renowned brands such as Toys R Us, Woolworths, Poundworld and Staples that have either gone into administration or disappeared altogether from the high streets. The several sales discounts that they offered was a clear sign of the challenges they were facing in the corporate world.
Discount Offers and Customer Experience
Now, let’s come back to the effect of discount offers on customer experience.
It might seem like discounts are a sure-fire way to attract new clients, bring back the old ones and encourage them all to keep coming back for more. And well, sometimes discount offers surely do help a business achieve these objectives without requiring any additional efforts. But, note the word, ‘sometimes.’
In other cases, the same efforts to drive up sales can have the exact opposite result. For many businesses, especially the relatively new ones, sales promotion can prove detrimental to their brand because it tends to drive customers away.
Here are a few main reasons that will help you understand how discount offers can have a negative impact on consumer behaviour.
It Devaluates the Quality of Goods and Services Being Sold
As consumers, you might want to get the best product at the lowest price possible. But nonetheless, it’s a fact that customers normally associate high price with high quality.
Think about brands like Apple, Mercedes Benz, Tiffany and the likes – despite how costly their products are relative to the average market prices, people are still crazy about buying these brands because they know what they will receive in return is worth every single penny paid to own it.
If you aspire to be a big brand, then your prices should be aspirational as well. This isn’t the same as selling overpriced items – it’s just about not valuing your goods and services below the price range that your customers hold as the benchmark for quality. It Tarnishes Your Brand Image
Holding sales discounts every now and then damages the brand image because the buyers will no longer have confidence in your offerings. Since discounts devalue the product being sold, it ultimately reflects on the brand image as well. After all, if a producer is repeatedly selling its products at a lower price than that it demands otherwise, it probably means that they have deliberately kept their pricing too high for the purpose. As a result, trust is lost and your customers will no longer feel so sure about your spending their hard earned money on your products.
It Destroys the Shopping Experience
Frequent sales discounts are known to encourage customers not to buy at the regular prices. It complicates the buyer’s decision-making process as customers get confused whether they should buy the product when needed or wait for the prices to go down instead.
When discounts lower the bar on the perceived value of the goods or services that you are selling, customers start expecting future discounts. As a result, you might be forced to offer price cuts even if you didn’t plan to initially, or worse, even if it eats away from your profits and undermines your financial standing.
Sometimes businesses are unable to keep their customers satisfied despite offering sales discounts because the percentage of waivered price might still be lower than what the client was hoping for.
Whether holding sales promotion is indicative of poor business performance or not, the fact remains that recurrent reduction in the sales price of goods and services can have adverse effects on the business because it changes the customer behaviour and their perception of your products altogether.
So, the next time you think of holding a sales promotion as a no-brainer way to increase your revenue, keep in mind the negative effects of discount offers on customer experience.