Brand vs. Discounts – Guys, For Women, It Is NOT All About Price

she-discountAccording to Chris Dickey, in a recent AdAge article, 2010 is the year for retailers to rethink pricing, discounts strategy and start rebuilding their brand value. He states:

Today many retailers find that their most immediate issue is working their way back out of discount-driven brand-price erosion.”

This really shouldn’t be a surprise to anyone. Learning that consumers were seeking lower prices, many marketers hastily responded with what they “assumed” that meant to women. Companies simply offered discounts, coupons and slashed pricing with little regard to their brand, but more importantly with little understanding of women. As a result, companies have devalued their brands and will now have to spend a great deal of money to restore it.

They weren’t hearing what women were truly seeking – a friend or a partner who would empathize with them through the stressful and challenging recession. I am not suggesting that reduced pricing is not part of the solution, but brand value must be communicated consistently and how the savings are delivered creates the fine line between compromising your brand and winning the short-term purchase as well as the long-term trust and loyalty of women. A January 2009 Marketing Week study conducted by HPI about the effects of the Recession on women, revealed:

  • Brands need to communicate they are on women’s side
  • Brands need to balance messages with both optimism and empathy
  • If you’re a premium brand you can’t suddenly claim to be cheap, but you can make sure they understand the value you offer in terms of the quality of the brand

Highlights of Chris’ article including his suggested steps to slowly return to profitability are noted below. I would add: ALWAYS keep the female in mind. It could help you prevent discounting mistakes other companies have made, or even speed the brand rebuilding process.

Most companies did a fair amount of discounting damage in 2008 and 2009 to merely survive. While this strategy addressed an immediate, sometimes dire, business situation, brands also taught the consumer to wait for a discount. Many brands have set new low-bar expectations for the consumer on what a good price, good deal and good offer is. And while 2010 will certainly not be the year we “get back to normal,” it is the year that many brands have to rethink their discount and pricing strategy to slowly return to higher profitability.

Step 1 – Assess the damage.
For instance, your best consumers have changed their buying patterns in frequency and/or average ticket, eroding short-term and likely long-term lifetime value. You have probably lost some of your best consumers to lower-value competitors, and you’ve grown your base of deal seekers.

Step 2 – Determine where the opportunity is to retrain, reactivate or acquire.
There are five typical segments of consumers ripe for testing your way out of discounting.

  1. Loyal consumers
  2. New consumers
  3. Mid-level consumers
  4. Lapsed “best” consumers
  5. Prospects who look like best consumers

Step 3 – Develop a comprehensive testing plan to determine how best to increase profit margin and long-term value by segment.
Begin to test retraining these consumers by evolving the offer strategy to determine where the optimal point of response versus margin comes into play. Changing customer behavior takes some time and patience to achieve; be patient.

Step 4 – Learn, evaluate and optimize.
Make  sure you measure everything as you are testing different strategies.

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 — starting today.

For the complete AdAge article, click here.

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Stephanie Holland is President and Executive Creative Director for Holland + Holland Advertising, Birmingham, Alabama. Working in an industry that is dominated by men, she is one of only 3% of the female creative directors in the country. Stephanie works mostly with male advertisers, helping them successfully market to women. Subscribe to She-conomy by Email

2 Responses to “Brand vs. Discounts – Guys, For Women, It Is NOT All About Price”

  1. Stephanie, I love this post. I believe the panic and precipitous actions by retailers and brands over the last year or two has created lasting damage. I understand it, I emphathize, but YIKES! It’s like eating junk food for a year straight…no wonder you might be unhealthy.

    Have you read the book “Cheap” by Ellen Ruppel Shell? It addresses the larger societal and economic consequences of discount culture. I did a little review of it here. Well, more of an intro. http://jules.dailygrommet.com/2009/11/02/five-examples-why-discount-culture-is-killing-our-economy/

    I love your blog.

  2. I only just recently discovered the world of blogs, and I have to say you’re quickly becoming one of my favorites. Great post and look forward to seeing more from you.

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