To Discount or Not to Discount – An Age-Old Question With No Easy Answers

Pricing is a complex issue for any organization or business and one of the key considerations that organizations must make is whether to discount what they have to offer. Even the “big guys” sometimes get it wrong. Consider¬†J.C. Penney’s recent missteps¬†with their move away from discounts under short-lived CEO Ron Johnson. Pricing is one of four components of an overall marketing strategy which includes Product, Price, Place and Promotion (the 4 P’s), all aligned around their desired brand identity or “image.”

At the outset, organizations need to consider what image it is they wish to hold in the mind of their target market (they should be very specific about that target market – trying to serve “everyone” is an exercise in futility). So, those organizations that refuse to ever discount are likely establishing an image of exclusivity or “high-end” status.

Unfortunately, for J.C. Penney and others that attempt to make shifts in strategy when they already have a firmly established position in the minds of their target audience, it’s difficult to convince a market that you’re something you’re not.

Is a discounting strategy a good idea? It depends on the brand image you hold, or wish to convey. While it’s neither right nor wrong to use a discounting strategy, your strategy conveys a message about what you are — and are not. You’ll never find a discounted Bose audio device, for instance. Those that use coupons frequently are appealing to a different market segment and achieving a different brand identity.

Recommended Reading:

The Strategy and Tactics of Pricing

 

Pricing and Profitability Management

 

 

 

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