Time Right to Dial Back Discounts
Chris Dickey, senior VP-director of customer relationship
management at Barkley, an agency that works with Build-A-Bear Workshop,
Sonic Drive-In and others, makes a case that brands need to rethink pricing
strategies and begin the process of cutting down on discounts in order
to return to more profitable sales.
According to the piece on the Ad Age website,
consumers have been conditioned to wait for discounts before buying and
will need to be reoriented to buying at times and prices more advantageous
to marketers. He recommends a four-step approach:
- Assess the damage – Mr. Dickey
recommends “a deep dive into a ‘consumer migration inventory.'” Likely
findings, he suggests, will include discovering over the past couple of
years that marketers have lost some of their “best consumers to lower-value
competitors” and acquired a larger group of “deal seekers.”
- Determine opportunities to retrain, reactivate or acquire –
Consumers come in five primary groups including: loyal (not motivated by
sales); new (but did not buy on discount); mid-level (sometimes buy on
deal); lapsed (were loyal but have moved elsewhere); and prospects (likely
to buy based on value as economy improves).
- Test to determine how to increase margins and build long-term
value – Determine where the “optimal point of
response versus margin comes into play.” Mr. Dickey believes targeted
communications over time will help marketers find the answers they seek.
- Evaluate and optimize – Test against controls and
determine what works. Mr. Dickey writes, “Brands will need to rethink their
offer strategy from one purely of discount to one of a price/value balance,
with the emphasis on relevant value that will, in turn, justify a premium.
It’s not a new challenge, but overcoming it after significant erosion will
be a key lever to increased profitability. The good news is, it’s a strategy
that can be tested, targeted and optimized.”
Discussion Questions: Do you
see brands and merchants being able to get consumers back to a reasonable
"price/value balance" anytime soon? What are your steps for weaning consumers
off of the mentality of waiting for a better deal?