The trap of cutting prices
We love free stuff! Why? Because a ‘free-promise’ is one of the most powerful attractors to humans and our preference for it is hardwired into our brains. Hence, it comes as no surprise that many brands offer buy-one-get-one-free promotions or discounts to push sales of their products. Retailers love it as it drives traffic. But what is the effect on the brand? Is it possible that the advantages of discount promotions are significantly higher to the retailer than to the brand itself?
Creating an experience and wrecking it after
Consumer’s perception, most people will agree, is where the real strength of a brand lies. Advertising can not only create but also reinforce and expand on the perception of how and why a particular brand is better than any other in this category. There certainly are many ways in which the brand experience can be created. At the same time, inadequate sales promotion campaigns can easily undermine often costly and extensive efforts undertaken by advertising and PR to build up brand affinity.
The challenge for brands is that they need to find a way to get around the problem of having to satisfy retail pressure on one hand and increase brand equity on the other. The most effective way of tackling this problem is finding ways to add value for both retailers and consumers alike.
Differentiation in a crowded marketplace
Sales promotion campaigns that offer added value to consumers help to achieve what is required: an integrated approach to marketing and branding. Ideally, this is accomplished by offering something that resonates with consumer’s lifestyle choices, such as travel incentives. Sales promotion campaigns then become very powerful tools to ensure both the overall health of a brand as well as the generation of greater revenue.
In a crowded marketplace, it is the promise of a unique experience that drives differentiation. Supported by point-of-sale and above-the-line advertising, sales promotion campaigns that offer added value have been an important creator of revenue for many brands on the market. Moreover, once participants redeem their incentives, the brand is empowered by the ability to build a meaningful relationship with consumers that is based on shared values and ideals.
Brands that focussed their efforts on price cuts on the other hand, have experienced serious problems in changing consumer’s perceptions of their brand. Once consumers base their loyalty on price, it is challenging for brands to recover from price cuts and a vicious circle emerges that becomes increasingly hard to escape.
Sending mixed messages
Focussing sales promotion on price cuts brings yet another problem with it: that of sending mixed messages. What are consumers supposed to think when they see an advert which tells them how amazing and, most importantly, valuable the brand is, when at the same time however, the brand needs to run a discount promotion to attract interest.
Even though, many consumers will potentially buy the product, as discount promotions have the ‘power of free’ as their most powerful psychological weapon, the brand value and the credibility of the ad’s value promise will be significantly undermined.
Added Value campaigns instead offer brands the opportunity to communicate effectively with consumers, for example by creating word of mouth. If brands give consumers a reason to be surprised and they tell their friends and family, the feeling of goodwill is passed on – and we all know that we trust our friends and family much more than any advert.
The bottom line
If brands want to overcome the vicious circle of entering never-ending discount wars and if they want to ensure both, a healthy brand as well as the generation of revenue, the advantages of added value sales promotion campaigns cannot be ignored. Looking at the negative effect that discount campaigns have on brand identity and equity, should make the verdict a no-brainer: if you want your sales promotion campaigns to not ruin your brand, add value instead of taking it away. It will pay off.