Bonjour, Hello and welcome to this 79th episode of the NATA PR SCHOOL podcast.
Are you someone who believes that selling more and more contributes to a company’s growth? It’s true that in the short term, selling more items can help to increase revenue. But those who are trapped in a cycle of discounts would probably tell you the opposite.
Just a few short years ago, Black Friday was a day of discounts unique to the US market. Black Friday is the last Friday of November, the day after American Thanksgiving, a holiday that’s considered even more important than Christmas is for Canadians. Today, Black Friday sales are widespread across the Canadian market. I even remember the year I bought clothes and accessories from a brand I love at full price. I was so disappointed when, barely a month later, they were on sale for 30% to 40% off. It goes without saying that I stopped buying this brand’s products at full price. Since then, this brand has closed its only store in Montreal, even though it was located in a busy shopping mall.
So, is it these sales that are eating into companies’ profits? What message are brands sending their customers by reducing the price of their products? Surely, it’s that full price is too expensive. Loyal customers who see these discounts will stop buying at regular price, just like I did. Several retailers have even noticed that a client will avoid buying products from brands that have a reputation for discounting their merchandise too often.
It hasn’t been formally proven that sales increase long-term profits, unless you do what Walmart has with its famous “Everyday low prices” policy. This is why brands that offer discounts often experience precipitous declines in demand at the end of the sale.
The law of perspective requires you to look to the future and not concentrate solely on short-term sales. We have a client at the agency in the lingerie sector that decided to impose a fixed price on all the retailers that sell its products. Although some stores cut ties with the brand, this strategy has proven to be a winning one in the medium term. I remember that after just one year, our client had maintained its revenue, despite losing several sales outlets and, in the second year, they increased their revenue by the amount they wanted.
Inflation, for example, can give a boost to a stagnant economy, but will inevitably lead to a recession in the long term.
Here, you’ll notice how the law of perspective comes into play.
I sincerely believe that the discount spiral is not the way to increase profits in the medium and long term. Companies need to continue to create appeal, which makes consumers want to buy your products. Yes, price can have an impact, but if we look more closely at what the major luxury brands are doing, we can see that price isn’t always an obstacle. I hear you when you say that luxury products aren’t for everyone, and you’re absolutely right. But even at more reasonable prices, many brands would do well to better control how and when they offer discounts.s
I hope you enjoyed this episode, and that this PR/marketing moment stimulates your creativity.
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