|HOLIDAY DISCOUNTS ARE A DANGEROUS DRUG|
Aruba, November 29, 2012 - A retail battle is underway. Just walk to the nearest shopping center as early as Thanksgiving night, and you will find people shoving their way across overcrowded aisles for the best deals, and retailers fighting tooth and nail for every dollar in customers' wallets.
Cynicism aside, there is no doubt that the six-week stretch between late November and early January is critical to the survival of many retail businesses. According to one study, for example, 30% of a merchant's yearly revenue is generated during this period. Add to this the conviction that people will spend (if properly motivated) and you have the perfect recipe for a pricing disaster: all-out competition for the earliest, deepest, and most enduring discount.
But a poorly executed promotional campaign can ruin a brand and a business just as easily as it can boost sales. And the holiday season exaggerates this threat because discounting has always been the retailer's weapon of choice.
To understand the problem with discounting, think of a price cut as a potent drug. The initial effect of a price cut on sales is clear, immediate, and intoxicatingly strong. But just as the company grows dependent on these concessions to meet its objectives, the market grows habituated and responds with less enthusiasm, fueling a downward spiral of deeper and more frequent price cuts.
Is there a healthier way to entice consumers? Most managers I know take a shortsighted view of what a discount is and what it can do for a business. There is a simple reason for this: managers don't spend enough time thinking about the phenomenon. To them, discounting is a dull tactical issue with a mechanical solution that can and should be routinized. Thus, it is not surprising that the output is a dumb promotion with no ambition other than making sure the sale takes place. To turn things around and improve the return on your marketing spend; consider what a smart promotion should look like.
Read more/ Source: http://blogs.hbr.org/cs/2012/11/the_seven_sins_of_holiday_pric.html