Year after year, retailers gear up for the bonanza, bumper and bonus sales they achieve on this single day. 😳
In a bid to calm the FOMO, they feel the need to have one-upmanship on their nearest rivals. Whilst, consumers seemingly love it and splash the cash on the deals. 💷
But there are some serious considerations as to whether this is indeed the right approach, especially during recessionary times as organisations are feeling the crunch. 💥
Let me explain.
The legend that is Les Binet did an amazing talk at the IPA recently where he explained that in most cases price promotions do not lead to profitable growth.
In many instances, research using econometrics found that consumers would have bought anyways.
But the findings go deeper.
Most perceived additional volume is not ‘incremental’, rather it:
– Just shifts the time horizon I.e. they buy earlier but still would have bought at some point
– Gets a person to buy the promoted product vs another full price option they would have bought from you anyways
– Repeated promotions impacts your pricing power over the long term, as it gets consumers into the ‘sales’ mindset in relation to your brand
– To price discount is to erode margins and profitability further, especially in an inflationary environment. Your effectively squeezing more than you can squeeze
So rather than adopt herd mentality, have a think about what is the right thing to do strategically for your brand. 🤔
As Les says, in this environment getting the pricing ‘P’ right is the most important of the 4Ps right now.
Take a look at his talk, it’s pure gold.🏆
