MGR eCommerce Edge Weekly | August 19, 2020 Top News This Week
Is Lowering Prices During the Pandemic a Good Idea? Maybe Not
As brands scramble to adjust to ever turbulent times, it seems one of the first levers that often gets pulled when looking for a sales bump is that of discounting. But is that the right answer? What are the long term impacts of positioning yourself as a discount brand instead of premium or higher?
Luxury brand adviser, Daniel Langer has this to say on lowering prices:
“Brands’ biggest error is to underestimate pricing effects. Research on competitive market signaling has shown that actively changing prices creates the single greatest competitive signaling effect, with some comparing it to a nuclear bomb. Changing a price always has a short-term lift effect, but the long-term fallout is almost always catastrophic.
If a luxury brand was able to sell a specific item at full price to hundreds of their best and most loyal customers, but then — due to a crisis or slow period — decided to detonate an atomic price drop, all they’ve done is reward a group of one-time, price-sensitive, non-loyal customers.
They trade in their brand equity, which their best customers built by paying full price, for short-term, easy growth. And then, any loyal, full-price customer of the brand who sees items they once bought become significantly discounted is sure to be alienated. Nothing makes loyal customers leave faster than deep discounts.”
Manuel Gil Del Real is the owner of MGR Consulting Group, an Interactive Marketing Agency providing marketing solutions to companies worldwide. He’s also an auto racing enthusiast and a blog author who enjoys sharing his thoughts and ideas on eCommerce, SEO, Social Media, Website Design, Video Marketing Internet Marketing, entrepreneurial advice, lifestyle and travel experiences among many others.