Laura Ries of Ries’ Pieces has written about the addictive nature of discounting and the negative implications of frequent coupon discounts and I couldn’t agree more.
Several of my small retailers are way too quick on the draw when it comes to offering discounts for the possibility of seeing customers streaming through their doors. Unfortunately, these nervous retailers are often disappointed and a tad confused when the discount offer doesn’t work. How could that be? Don’t my customers know that a discount cuts into my profits?
Consumers know. They just don’t care. Instead they have been and are continuously being conditioned, groomed and as Ries implies addicted to heavy discounts and coupon usage by retailers, large and small, and by the likes of Groupon.
So what is the problem with Discounting or Coupons?
Here is the question: When all retailers are offering major coupon discounts, what is there to differentiate one store from another except the size of the discount? Answer: Nothing. So whatever used to differentiate your retail operation from the competition, has been erased through over use of discounts.
Another problem is frequent coupons conditions customers to wait until the next big Sale. Ikea has a major sale every 4th of July. Many shoppers, like me, wait for that sale and visit Ikea once or maybe twice a year. This means less profits for Ikea. Some national retailers have sales every week like J.C. Penny’s and Macy’s. They tend to put things on sale one week and off the next trying to play this unfriendly game of Gotcha with the customer. “Yes, that watch was on sale yesterday, but not today. Do you still want it?” Not really. The customer may have wanted it if they could have claimed that they got this great watch at a ‘great price’, but it lost its allure at full retail.
Perhaps the most significant problem is that frequent discounts damages the long-term image of the brand. Rather than representing a truly unique resource for merchandise of value, frequent discounts associates your small business with “stuff for a bargain”. This isn’t a very flattering image in the rough and tumbled world of retailing. Nor is it very competitive.
A store’s brand or image is a lot like one’s personal reputation. It takes years and a lot of different variables to create a cohesive and positive image. Heavy discounting can seriously taint that image. Once tainted, it is difficult and costly to undo. So the next time you are tempted to offer a coupon or a discount, stop, think and ask yourself if you’re feeding your customers discount cocaine.
Source: Ries’ Pieces