Beware The Discount: Gaining Market Share During A Recession

Discount

I was recently published in Alberta Venture, discussing how brands could tap into the recession zeitgeist.

It was a fun piece to write; it allowed me to review what brands were doing right - and wrong - to gain market share during the economic downturn. The gist of the article is:

There is nothing inherently wrong with tweaking your brand to reflect the recession. But like most things, it’s the execution that matters... “Dirt cheap” isn’t a long-term strategy; aspirational partner is. Ensure that brand tweaks make consumers feel like savvy shoppers, not scroungy skinflints.

I feel that recent campaigns by McDonald's missed the mark, but laud Target's "Brand New Day" campaign as an insightful way to make thrift a fun part of life.

Apple, A Luxury Experience

A good friend and former work colleague, Kristian Perry - also a great filmmaker, writer, and animator - emailed his response, and I was struck by what he had to say about Apple in particular:

In the computer world, I understand that there is a cry for Apple to make a cheaper notebook computer -- their cheapest one retails for about $1,000, but I think this would be a mistake.  Apple's real selling point is that you are not buying a computer, but an experience.

If they sold a cheaper machine, they might have to cut corners, and then you might see more breaks in the facade of the "Apple Lifestyle".  So unless they can maintain the quality of experience that comes with them being a computer luxury brand, they would be making a real mistake to sell a "cheap" model.

I think Kristian is totally correct. Not just about faulty products, but a cheapened experience; brands can harm themselves by falling into the "discount trap," especially during tough economic times.

A Lesson From Politics

It reminds me of an important lesson I learned during my time in politics. We were sending emails and soliciting donations for our cause. I noticed that when we emphasized the smallest donation, our overall yield was far lower than when we placed higher donation values above the fold.

Why was this happening? Didn't people want to know the value option - that we would take whatever we could get?

It turns out that they didn't want a value. Even in a pinched economy, our donors weren't giving away money to a worthy cause - they were investing in us, our candidate, or our mission.

When an ideal translates into tangible money, people don't want to toss pennies, they'd rather palm you $100 you can really use.

Try Angie's List Today!

The Discount Spiral

I'm not saying value or discounts are all bad; sometimes they can be very effective (Target is a perfect example). But if they're done all the time and that's the only message you really have - you're killing your long-term strategy.

Think about the last time you were in the grocery store: they probably had signage alerting you to their "discount price." But we all know their "regular price" was inflated and is never actually charged. Everything is discount all the time! So really, nothing is truly discounted, ever.

And if you're only talking about value and discounts, it makes your brand sound cheap. Whole Foods has experienced a stock dip just like other grocery brands, but two things separate them: their dip hasn't been as low as other retailers and they are far better positioned for post-recession spending (when consumers emphasize quality or variety over discounts).

What Do You Think?

Am I off the mark? Despite the recession, I believe you shouldn't hurt your long-term strategy for short-term gains. And all of you are thinking "No shit." But then why do many - dare I say "most" - brands ignore this advice?

Maybe it's a panic for good results each quarter. Maybe it's because CMOs have an average tenure of less than two years - the shortest time of the C-level suite.

Why do you think long-term strategy is losing out to fire sales? Why has your brand succumbed or how have you resisted the discount temptation? The community would love to hear your thoughts in the comments section below.

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P.S.: Read the full Alberta Venture piece and check out Kristian's great work.

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(Image courtesy of Jenny Downing via Flickr)