Discounting Opinions
A colleague came into my office the other day and said, "David, no one ever buys anything anymore unless it is on sale. So, we should always have a sale going." I just stared at him in disbelief. First, it should be noted that the person making the comment was a CFO. I was shocked that a CFO would so readily apply discounts to generate sales. But I was more surprised by the broad application of his generalization.
Of course, as a marketing veteran of 20 years I knew that his statement wasn't absolutely true. Yes, people often wait for sales before making a purchase, and that incentive is what clinches the deal. However, I think this is more true of commodity-based items, not for luxury or experience purchases. Sure there will be a segment who only buy on price, and the discount is a huge helper, but at what point do you move away from that segment and work toward the segment that buys on value.
In the end, it was just a matter of opinion...his versus mine. But I did have a few fleeting moments of doubt...wondering if we as marketers have convinced ourselves of what we want to believe, and have gathered the data to support our claims. Marketers and marketing in general have complained for years that we lack a voice at the strategy table, that we are viewed as an expense rather than an investment, that we are not taken as seriously as we feel we should. I may have been right in the long run, but when the sales bell rings on the days we have sales more than the days we don't, I can't fault his strong belief.
Comments
David, I think your story is a great example of the situation that exists in most companies; sales strategy drives companies rather than a marketing strategy. Until marketing people can illustrate why following the marketing concept will in the end make a company more money, we will always play second fiddle to such ideas.
You are using this blog to discuss ideas, as the blog for the American Marketing Association; I'd like to take the discussion wider, how can we as a marketing community provide the case studies and results to convince senior management that the marketing model is the right strategy to follow?
Posted by: john cass | February 20, 2007 10:33 AM
If your short term marketing strategy entails using price to gain entry into other segments, a discount may be appropriate. The hope here is to bring awareness to the other untapped segment that is price sensitive, yet has a sense for value. It also may be applicable to introduce a new brand and to build traffic and equity. However, that being said, I believe that price discounts do devalue the brand in the long term, and differentiation methods other than price should be explored.
In product driven companies, marketing is seen as an afterthought as it is usually performed by experienced engineers with excellent product knowledge but little marketing training.
Maybe turn the tables on the CFO and quantify how price discounts will eventually erode margin and market share, therefore decreasing sales volume and profitability in the long term.
Posted by: Dave Barraco | February 20, 2007 11:50 AM