Is now the time to discount or value add?

marketing in a recession

As we’re gleefully told by the politicians we’re not in recession yet. But equally we’re told by the pundits and business journo’s we will be soon.

So while the past 12 months has been tough for companies and marketing teams it looks like it’s about to get a whole lot tougher – especially if the forecasts of 9% unemployment by mid 2010 prove to be accurate.

So is now the time for companies to discount or value add? Should marketers be doing one or the other, or, gulp, both?

It’s a tough set of questions for marketers and agencies alike.

In the good times it’s very easy to stick to your brand principles and produce offers accordingly: Luxury brands tend not to discount, they market the added value services associated with the purchase. Whereas cheaper products and brands tend to go with more price sensitive offers. These things work in the good times and that’s fine.

But when the majority of the spenders in the economy are tightening their belts, marketers need to reassess the strength of the brand price point / value principles.

Is it more important for a luxury brand to stick to it’s ‘we’re expensive, suck it up‘ guns or is it better to go along with the crowd and maybe discount a little, or throw in more products and services to get people over the line? Is it a good or a bad thing to be remembered by their consumers for bending on price or the amount of throw ins when the economy was down?

Conversely, if a brand’s products are cheap already, how much more room is there to discount? And if all your competitors are discounting too how effective is your discount? Does it make sense to look to value-adding as a distinguisher?

One of the companies I’m involved with is a premium product in its market. Right now we’re going down the value adding path (for the most part). We’ve done testing in the past which indicates that our customers and potential customers don’t value a discount as much as they see an opportunity to get some extras thrown in. And what we’ve seen is that while value add works, we’re having to throw in a little more than we previously were. This seems to be working ok for the moment.

We are however doing some testing on discounted price offers to a specific segment of recently lapsed customers to test whether for some people discounting is what will flick their switch.

The way I see it is that if we have a 70% retention rate at full price, out of 100 people that means we keep 70. But, if we can get an extra 5% retention rate at a slightly lower amount, it’s be better than losing them altogether isn’t it?

I’d be really interested to see what other people have to say on this topic.

Are you discounting or value adding? How are you marketing during the downturn?

One comment

  1. i guess for some companies there’s no room to move, I mean, if you’re already dirt cheap, how much further can you go while still making a profit?

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