Brands and Discounts

Thousands of businesses ‘accidentally’ give customers more discount than the profit they make on certain individual products or services.

David Ogilvy, a legend along-side the likes of Rosser Reeves and Bill Bernbach, has some strong words to say about deals and price. They are certainly worth repeating:

Discount voucher sites are all the rage. Groupon, Living Social and a host of other players are entering the mushrooming markdown market. This begs the question if discount sites are good news for brand value?

Yesterday, I splurged on an expensive hair treatment that promises to give me frizz-free hair for 12 weeks. I first learned of this treatment a year ago, but rejected it as a frivolous indulgence at $350 a treatment. But when I was told of a $129 price promotion on the same treatment, I immediately said, ‘Sign me up!’  Now at $129, frizz-free hair is still a frivolous indulgence — but think of the ‘value’!  A similar mechanism was at work last month when I spent more than I intended to on a car. The more expensive car had a higher discount. How could I pass up the greater ‘value’, even if it was costing me more?

Many marketers asked Santa for a social coupon campaign for 2011. The explosive growth of Groupon and Groupon clones (BuyWithMe, LivingSocial, SocialBuy, and Tippr), offering “ridiculously huge” coupons (50-90% off), is taking marketing plans by storm.