Price Promotion - Good or Bad?

[LD]

I don't really have much to offer for a price promotion that I feel will bring in new business so that repeat business will "buy" again later on, at the regular price. This article below infers that price promotion, when used as a "strategy", can get you into hot water because when people get used to being offered reduced prices, when they are ready to buy again, the tendencies are that these buyers will wait it out for better pricing.

Being Careful with Price Promotions (http://www.smallbusinessnewz.com/topnews/2011/05/16/why-you-need-to-be-careful-with-price-promotions#comments)

What are your thoughts.

[SteveGerencser]

When you sell based on price you have put yourself in the cheapest guy wins category.. When you sell based on quality you place yourself above the competition as being better than them (where possible).. This is a very old argument in the jewelry industry.. Our store went 10 years and never had a sale.. Didn't need it, didn't want it.. Our customers came to us because we were the best in the region.. And our prices were more than fair to begin with so there was no reason to devalue ourselves and go after mall customers that were shopping on price alone..

[Dcrux]

My thoughts are the article is describing a phenomenon whereby those clueless about marketing think lowering your price is a simple, mindless, fix. And then they find out it is a disaterous trap they can't get out of.

The article doesn't distinguish that, often, you are attracting consumers not customers. And you've locked yourself into, and gathered a group who will never buy at regular prices. And they often have zero loyalty.

What these clueless people don't know is there is a segment that buys a product, like clohing, wears it -- then returns it. That's not an event ...it's a life long technique. They will always return what they buy -- it's what they do. And lowering your price sets off a feeding frenzy of just this kind of so-called "customer." And they tell their bottom feeder friends, and before you know it -- that's all you're known for, that's your market.

It needn't be clothing or products. Graphic design and web design sees the consumer/customer difference all the time: They simply can't understand what they're seeing. Far after they've locked themselves into a self-reinforcing ecosystem of cut rate jobs, they come here to complain the market sucks.

And they are absolutely right. Their market sucks. The only people they ever see suck. But that's not the real picture. They set themselves up for it. And -- why denying it adamantly -- every single thing they do tells consumers to do business and tells value customers "Leave." It's the basis of web design to attract bottom feeders.

I get a customer contact me and pay $250 dollars for a Powerpoint of a web site. (Exactly TWO Slides) No code. No nothing. And I get a job for $850 for no layout, no css, no nothing For a Single Page. And then I come here to be told I don't understand the market.

It's a hoot. But they are right. I don't understand the bottom feeder market. ...I don't understand the marketing to the Amish market (It's half-past 2011, stop marketing to people without websites, wouldya). ...I don't understand the people without any money (small business) market.

My thoughts are you really, really want to just drop price. And you're shopping for someone to say it is okay. I am not that person. There are plenty of marketing techniques for adding value and selling at higher prices. But those require effort, study, and testing to get right. And, my thoughts are, you don't want that.

One company -- one -- understands and can use price competition: Walmart. And Walmat can use price because its whole billion dollar logistics system allows it. Walmart knows you can't just drop price, you have to work hard to wring costs out of every bit of the system, and that includes managing supplier's systems (a vast undertaking). The overwhelming majority use price competition in a headlong race to bancruptcy court.

Lowering price is the most brain dead thing you can do. That's why it has the biggest audience of avid fans.

[Hal in Texas]

There is a time and place for price marketing. Pricing does not always cheapen the product or service. Pricing along with urgency can get more immediate business from those people who just keep waiting and waiting. Have a reason for the sale and a limited time for the sale. The better the reason, the more credible the sale will be. Don't just reduce price to beat out the competition. Don't give 10% off, that just is not effective. I used to have to come up with a new sale each week when I was an advertising manager with a drug store chain. I am not suggesting anything like that.

One TV store owner asked me to come up with a big sale because he was hurting for business. I came up with a sale to break the record for the most TVs sold in the county in any one weekend. He had his best week ever. The next week we had a sale to apologize to all of the people who were unable to buy TVs the weekend before because we were too busy to wait on all of the customers. The second weekend beat the first.

The reason for the sale is very important and don't do it too often.

[LD]

I found that "rut" way back when I first started out. And although I still retain a few legacy clients from back then, most had to be either "let go" or "fired" (same thing I guess) along the way because they wanted the bargain rates to continue.

I still give a small discount to my networking group of 20 or so business associates, because they refer business to me. But these associated networking business owners understand I cannot give their referrals the same rate. It works, because word of mouth still triumphs over some of the crazies I get from from the internet. :smile:

[Dcrux]

He had his best week ever

I dearly hope you mean "most profitable." Because if you mean "we just moved units," you could have kicked them off the back of a truck and drove off.


most had to be either "let go" or "fired" (same thing I guess) along the way because they wanted the bargain rates to continue.

That is what usually happens. Not always. Usually.

It requires more savvy (and money) to engage in price competition than people realize. Since the whole idea is having price make up for marketing savvy, this backfires a lot.

[SamyHyppia]

well if your product is good the clients will buy it even when the promotion is over. the fact is simple: quality beats price all over the world

[Dcrux]

well if your product is good the clients will buy it even when the promotion is over.

Essentially, it's like the car subsidy leading to a buying drought immediately after. The problem is your sale price gets people who might have bought a month, two, or three down the line. Perhaps they were budgeting and hadn't reached the full price. Perhaps they were sitting on the fence, and something about the promotion caused them to act. (Very few sales convince people that there won't be another one, right around the corner.)

Will people buy after the sale? Sure. Eventually. And by that time you've had another sale. Dropping price gets to be highly addictive.

What happens is you train people to either buy at reduce price now, or wait for the next sale. Why? Because they will feel foolish buying at full price and then see a sale the next week. That's the scenario running in these people's minds. It's a testable proposition which has been carried out time and time again.

And, with quality, why buy now when you can get quality ...and the lower price later? Honestly, when have you EVER bought full well knowing the price would be lower soon. The only time that happens is with a prestige purchase. And you can have a quality product without a prestige factor.


Related:

The Danger of Price Promotions (http://www.entrepreneur-resources.net/the-danger-of-price-promotions)