Product Discounts Are More Trouble Than You Think

More Discounts! We Have No Good Reason To Buy From Us

I can’t tell you how many times I’ve been to a product meeting where the horrifying term ‘discounts’ didn’t come up. That’s probably because I haven’t been to one where it didn’t.

As a product manager, you spend a lot of time and effort creating a strong value proposition. Unfortunately, you also have to contend with people talking about discounts and offers even before the product is ready for launch.

Sales teams love them, product teams hate them. I truly believe that’s where the love-hate relationship began.

Discounts are a matter of last resort. They aren’t supposed to be your first line of defence. While discounting carries a higher probability of driving up sales, it does more harm than good in the long-term.

This is because when you discount often, you train your sales teams to take the easier route. Price becomes the USP. You also train customers to equate your product to a discounted value instead of the most appropriate price.

It doesn’t stop there. You also give up power with distribution channels who begin to see your product or brand as desperate for traction. They learn how to ‘handle’ you with time.

As a product manager, if you are caving to regular discounts, you are almost certainly trapping yourself. At lower profit margins, research and development into newer features could take a budget hit.

Shopping festivals and seasons are a major contributor to the discount syndrome. If you’ve worked in Dubai, you know what I’m talking about. No sooner have you exited one discounted period, you find yourself in another one.

Lower price points compel businesses to launch lower-ended products or repurpose end-of-lifecycle stock from other geographies. It simply delays the roadmap for what the business really wants to drive.

Lowering prices also sets in motion the tradition of compromising on quality and making tradeoffs. I’ve discussed this in more detail in an earlier article – “Why Private Labels In The Middle East Have Low Brand Equity“.

So, What Should We Do In That Case?

Market, don’t sell: Businesses need to focus on building relationships with customers, whether B2B or B2C. After all, people do business with people they like. Invest in your sales teams, your communication channels, messaging strategies and community building efforts. Encourage dialogue and keep customers engaged. Make them see why you stand out in the crowd.

Build undeniable value: It’s tough to build features that no one else has thought of, especially in mature markets. But, finding something that’s difficult to replicate and demonstrates value are those silver bullets you need to avoid discount traps. Investing in R&D instead of cash-strapping it, is a safe bet.

Stay accessible: We are facing a time-sensitive, digitally-inclined and informed customer. Making information and products accessible, together with payment options and fast delivery times is key to successfully out performing those that don’t. Amazon does a brilliant job in this regard.

Build a brand, not a commodity: People may come and go, buildings may rise and fall, but brands will endure. When products reach a certain plateau, where big innovation is less likely, it’s the affinity that a product or brand has with an audience that defines its success. It is the purpose behind it that matters most. Simon Sinek articulated this exceptionally well in his book “Start With Why”, which I encourage anyone to read.

Pandemics, Downturns and Natural Calamities

What happens in a really tough market. For instance, how does one weather the storm during a global pandemic?

Of course, there are exceptional situations that warrant exceptional responses. If you pinned your hopes on discounted pricing before, you’re in deeper trouble now for sure.

Much of what I mentioned above still holds during these times, with obvious pivots to accommodate for the unfortunate circumstance. The good thing is that you aren’t alone. I also touched upon this issue in my article “Marketing During A Pandemic

In Conclusion

Now, what I’ve discussed isn’t rocket science. This isn’t wisdom presented only to me by the gods. They are elementary practices in any sound business strategy.

When athletes see a slump in form, coaches don’t ask them to simply perform better. They tell them to go back to the basics and raise their game from there.

This works in business too. Rather than succumb to the easiest available tool, why not go back to the basics instead. Let the last resort be the last resort.

Discounts are easy mechanisms to grow sales, but they lead you down a few rabbit holes that you may find difficult to escape. Trust me, I’ve been there.

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