Discounting prices can discount your brand says Eisner
By Leon Gettler, Talking Business >>
IN AUSTRALIA, consumers are used to companies discounting products when there’s a downturn in the market. But a discount in tough times can damage a brand, according to Jason Eisner, co-founder of BrandQuest, a strategy, culture and brand management company.
He said businesses needed to work out where exactly they fit in the market. If they are a company modelled on providing discounts, they might be able to do it. But if not, they should not go down the discount route.
“I think people during an economic downturn get scared and especially in Australia, one of the first things we do is we go straight to discounting. It’s kind of a last resort thing to do and one of the things it does is it basically destroys your brand,” Mr Eisner told Talking Business.
“It’s a very quick fix to an ongoing problem. It’s probably the last resort to turn to and people use it as their first resort.”
He said “price tells us everything, what the business is about”.
PRICE INDICATES SUPPLY AND DEMAND
Mr Eisner said price told about supply and demand. Demand had everything to do with what the product was worth and how much people liked it.
He said changing the price would always have an impact and he said it was done way too often and done with a short term viewpoint without much analysis.
He said there were times when it was worth discounting and there were other times when BrandQuest would recommend against it.
“If you’re a low cost brand and your brand is always a discounted brand, and the reason why people come to you is because it’s a discount, then there’s probably a reason to discount it at every point in time,” Mr Eisner said.
This could also be done when there was an oversupply of the product, or the company was entering a new market.
“If you have a brand and you put lots of money into it and you have built it over time, discounting is eroding that,” Mr Eisner said. “It basically says the value of my brand is actually not as much as I priced it at, I’m going to discount it and I’m saying you shouldn’t need to pay full price for my brand.
“And the best brands in the world don’t.”
TOP BRANDS HOLD THEIR PRICES
Examples of that include brands like Apple and Mercedes, BMW and Audi.
Their products are worth more than what their competitors are selling, so they use price the opposite way to build into their brand, letting the consumer know it is a quality product.
“In general, the big luxury brands tend not to discount because they realise if you put lots and lots of money into building your brand, all you’re doing is destroying that brand value if you discount too much,” he said.
“If I am in the top prestige premium market, you are pretty hard pressed to discount. If I was in the budget commodity market with low price, low quality, that’s where you are in this discount thing.”
Any company setting a price has to do this in conjunction with a marketing strategy.
“A strategy is about thinking of the long term and price is a very short term mechanism that you can change over time. Everybody gets scared and they use a sort term lever like price and the reality is, it affects their long term strategy,” Mr Eisner said.
Hear the complete interview and catch up with other topical business news on Leon Gettler’s Talking Business podcast, released every Friday at www.acast.com/talkingbusiness.