Damaging Discounts

I am undergoing an internal battle writing this article. As a theatre goer, I love a discount. It means that I save money, can see more shows and get more ‘bang for my buck’. But as a marketer, I have a completely different view. So when is it right to discount?

TKTS Discount Lines

Here is where my internal quandary lies. When purchasing tickets to the show, every consumer is price sensitive. We like to save our money so that we can spend it on more purchases. In fact, I doubt that there is an entertainment consumer who hasn’t seen the field for a discount code when booking tickets and immediately opened up a new internet tab to search for any discount codes.

But it has a markedly different impact from a branding perspective!

Discounts hurt. And I’m not referring to the bottom line. Their impact is more than purely financial. Their impact extends right through to the brand’s reputation and also has a great impact on a customer’s behaviour.

With regards to a brand’s reputation, constant discounting can bring on some negative connotations. Much like the clearance stickers at the Supermarket. If a product kept ending up with massive mark downs, the consumer may begin to think that it isn’t any good because no one is purchasing it. That can cause irreversible reputation damage. But it is in the customer behaviour change that the most damage is done.

The mark of a successful marketing campaign is long term behaviour change and this is at the top of every marketer’s wish list. Transport Authorities try to change the behaviour of people using mobile phones behind the wheel. Coffee Machine companies try to change our behaviour of going out to a café for a coffee. Musicals try to cultivate the behaviour of going to see entertainment live. And this last one is often achieved through discounting.

However, discounting creates its own behaviour change. If customers get used to using discounts then their perceived value of the product will change. Rather than being valued at the advertised price, it will be valued at the discounted price encouraging customers to wait for a discount before they engage. This can create a never-ending cycle of increasing prices and then offering a discount.

And unless you want to end up appealing to the Reject Shop audience, being associated with discounting is not a good thing.

What is the solution then?

Offer discounts, by all means, but don’t associate them with desperation. Use them as a reward. Maybe they reward customers who engaged with the last show, maybe they are promoted to an exclusive mailing list or maybe they are used as an incentive to come back with a friend. But they should never be general. General, widely-available discounts only suggest one thing . . . your product is overpriced and while that may not be the case, that is certainly what it looks like!

Discounting may be a dangerous game, but in the right hands it can lead to increased loyalty and audience development. So discount wisely!