When we were neck deep in the advertising industry and handling small business clients, we regularly ran into the same issues.
Issue 1: The owner had little working knowledge of marketing tactics for their business.
Issue 2: The business was anxious about spending before achieving a certain amount of revenue (you know, from customers who didn't know about them).
Issue 3: The belief that slashing prices and offering sales and discounts is what would save the business and gain attention.
We would like to focus our attention on issue number three, especially while the holiday shopping season is well underway.
We call the "sale" a curse because of how the customer perceives the sale and how the customer remembers that the business — at a previous time — had a sale.
Many of you have had this experience: You are walking around and visit a store where you've purchased an item before. Something catches your eye, and you take a look at the price. You could buy it now, but you know that the business will have a sale on it later. So you wait.
That's why Black Friday, Small Business Saturday, and Cyber Monday have gotten so huge. Instead of consumers spreading out their purchases and getting items at full value, businesses have trained consumers to wait for the seasonal specials, then indulge their shopping desires as quickly as they can.
Now, we're not knocking the holiday shopping season; businesses do, in fact, make a substantial amount of their yearly earnings during the time between Thanksgiving and New Year’s.
But we are more concerned with the unintended consequences of conditioning consumers to only shop their hearts out when specials and discounts are being promoted.
Why? Well, slashing a price can mean two things:
1) The value of the product doesn't actually match the price.
Or, and this is the reason that businesses are hoping is the case:
2) Cutting the price to a lower one is actually a DEAL for the consumer, and the consumer is getting the upper hand by getting the product during this time.
Our humble opinion is that businesses are devaluing their products and services in exchange for marketing gimmicks. The reason we price goods and services is to show the customer what it takes in order for the transaction to be worth it for both parties. The moment a sale or discount happens, the message is sent to the consumer that the price is arbitrary, and that the actual value of the product is less.
But hey, maybe we're wrong.
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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