Retailers: Don’t Discount the Power of Brand Love

Retailers: Don’t Discount the Power of Brand Love

Access to online information has benefitted advertisers, but also consumers. Strategic consumers (those making purchases based on potential markdowns) are getting more and more sophisticated with the ability to review products, check with influencers, price compare, track specific brands’ discount schedules, and more—all online. Thus, the line between bargain hunting and shopping has become exponentially finer.

Apps like Rather-Be-Shopping.com or RetailMeNot help the strategic shopper by offering daily coupons, BOGOs and the like, while Happy Money Saver does the same from the blogosphere. What’s more, retailers are totally onboard with slashing prices left and right, so even non-strategic consumers who don’t enjoy shopping (like me!) to seek out and wait for the best deal.

None of this is new, nor is the response of dynamic pricing to manage revenue. Bragging about getting the biggest discount has gained popularity in the U.S. since the 2008 economic meltdown. But how do pricing promotions really impact consumer behavior? And should revenue management and the brand team be having a conversation?

To the first question about pricing and consumer behavior, let’s talk motivational crowding, a theory (by Anghelcev and Eighmey) about discounts and brand love. It states, “Discounts for brands that consumers may purchase for intrinsic reasons may actually be detrimental to the brand by placing the entire consumer-brand relationship in a materialistic, transactional paradigm where competing brands with better deals can sometimes win.” Whoa. Put simpler, discounts may actually hurt the relationship your consumers have with your brand. Rather than buying your product because of perceived value or other intrinsic motivators, consumers will price shop—relentlessly—relegating your products to price points.

For example, consider Tesla Model X cars. Though relatively new to the market, they’ve not been discounted, nor do potential buyers expect them to be. There’s a wide array of other such high-end brands that are seldom discounted, like Rolex or Apple. These aren’t perceived as high-end brands only due to their pricing; their consumers have deep affinity for them because of intrinsic needs, like status, quality or trust. Now, imagine Tesla slashing their Model X prices over and over. Regardless of quality and as a result of the new perceived value of the car, consumers may start comparing the Model X with Toyota’s Prius Prime model, a fine car in its own right, but not a Model X.

As Shopify, the ecommerce platform provider, blogged when considering promotions, “it’s important to consider your overall brand strategy before you begin offering discounts.” Sure, this sounds simple, but it’s easy to manipulate pricing to drive revenue when brand affinity may be less quantitative. It’s true, consumer attitudes toward incentives, discounts and quality have a direct impact on your brand, and vice versa.

So, now what?

There are many aspects of brand strategy, such as positioning and the unique selling proposition, but understanding your consumer and what motivates them is the first and most critical step. Part of the research should be about consumer attitudes toward promotions. This is where pricing and brand teams need to make nice. What if your consumers’ love for your brand doesn’t suffer from discounting as long as it’s part of a loyalty program? Or, on the other hand, what if your consumers see discounts as a sure-fire way of lessening the value of your brand?

No matter the outcomes, your consumer research should be driving the strategy for both pricing and brand affinity. To the latter, it’s not about just targeting consumers, but really understanding their brand experience expectations—putting them in the driver’s seat. In a recent AdAge article about the company’s new branding, Best Buy’s CMO, Whit Alexander, said, "It's really about building more aggressively toward serving customers and helping change lives with technology. We needed a way to tell the story a little differently through how we interact with customers."

It’s not your pricing team or brand team driving your revenue. It’s your consumers. Listen to them.