Why Discounts Often Fail to Lure Buyers

Posted: November 12, 2009
Written by: Paul Entin
Category: Marketing

"20% off everything!" from Kohl’s, "$30.00 off a $150.00 purchase" from Staples and "20% off our best available rate!" from Great Wolf Lodge were sandwiched between the Plastics News and American Printer magazines in the mail. I can't think of anything I need at Kohl's, I stocked up on printer ink with the prior Staples coupon and with the cost of keeping the pool heated it would drive me crazy to haul the family to Great Wolf Lodge. These offers have no impact on me because I'm not sold on the need for their products.

I think many marketers have panicked. And from this week's holiday shopping discount mailers, they've also gotten lazy. Price - even during a downturn - is a significant but not the most important factor in a buying decision.

Panic, by definition, blocks sound thinking and clouds judgment. It skips over the cognitive thinking process. For marketers, this means skipping over such considerations as why someone would want your product, what problem it solves, payback time and the track record of your company, for a few examples. Panic mode drives many marketers to leap right to price slashing, as per my stack of mail today. Yet eons of research reveals that price - even during a downturn - is a significant but not the most important factor in a buying decision. Product performance, confidence in the brand or company, positive experience with the sales person, length of the purchasing process, lead time, hassle rating and other factors, including emotional issues such as the desire for approval and praise by superiors, colleagues and staff all come into play. Together, many factors simultaneously influence the perceived value of your product. If a prospect places a high value on your product then the price becomes less important in the decision making process. If a prospect places very little value on your product - such as my lackluster interest in Kohl's - then even a steep discount will have little influence on a purchase decision.

Many of these panicked, if lazy marketers have forgotten to create demand for their products. Had Kohl's featured new bathing suits, flip flops and the other summer items we seem to need every year then I would have perceived some value in going to the store. Had Staples featured ergonomically shaped keyboards, which I've been meaning to get anyway, then I would have perceived some value in going to the store. Had Great Wolf Lodge reminded me that vacations are all about the kids, family fun and togetherness then I might have taken a second look, paused amid the guilt and perceived some value in a short vacation at the waterpark. Had they created perceived value and then hit me with a discount, I'd already be packing my flip flops, suit and laptop for the waterpark.

Discounting in and of itself can strip a product of its value. Discounting after creating value strengthens the value proposition and serves as an enticement that often gets true prospects off the fence and ready to buy. That's why price concessions are most effective in direct mail and email marketing when offered to an in-house list of customers and prospects - they already perceive value in the company and the product and the discount sweetens the deal. Where name brand awareness and the value of the product have not been established, the impact of a discount is weakened dramatically.




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