It is holiday season. This is the time where people think less about budgets and more about the "right gift" for friends, family, colleagues, and whoever else made the holy gift list.
And this is the time where brands are chomping at the bit for every single customer in order to meet and exceed sales goals. Therefore, this is the time where brands are tempted to put everything they sell on sale or discount in order to draw people in.
In our brief time in the industry, we're here to say that sales and discounts are not the only thing that can boost revenue.
Thankfully, we are not the only ones who believe that. And our friends came with proof.
RSR Research, a research company that focuses on the performance and effectiveness of retailers, compiled a report with several other partners in September 2013 about how markdowns can hinder performance. More specifically, it found that those brands that continually offer markdowns notice an erosion in brand equity, and see that their products are being outshined by others. Markdowns are the beginning to a vicious cycle, and a cycle that no brand wants to be in.
Here is a snapshot of some data in the report.
As you can see, the "winners," those retail chains that have revenues and profits well above their industry average, see little brand erosion and believe they are out being out-priced or out-styled. That group, and we're included, believe that those findings are tied together.
Many brands will be fortunate that consumers will chalk up the good deals to it being the holiday season, and when your store gets back to regular prices, little to no brand erosion will be noticed, But for those brands that are considering taking the cheap way out and consistently offering sales and discounts, you are facing the chance of losing value.
We constantly battled small business owners on this very topic. Several were so set on getting sales and making quick money, rather than building a brand and taking time. Of course, when one is looking to spend money before making money, it has an unnerving effect. We get it. But it is foolish to cheapen your brand's product offerings by supplying discounted items without a known time limit, or for a good reason.
Sales and discounts can work. Just don't rely on them for the long run.
Dwayne W. Waite Jr. is partner and principal at JDW: The Charlotte Agency, a marketing and advertising shop in Charlotte, NC. He enjoys consumer behavior, economics, and football.
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