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As competition in the different dining segments are in constant competition, some chains rely more and more on coupons and special discounts to draw sales. While in the short term discounting can be effective in getting consumers to try a new product, this tactic cannot be counted on to maintain sales.
We could learn from the cruise industry, which has discovered consumers are indeed trainable. A major cruise line will announce their summer schedule well in advance and do all it can to persuade travel agents and passengers to book early.
Then as summer approaches and berths are unfilled, the cruise line will slash fares by as much as 50%. The result is passengers learn to book late rather than early, giving the industry’s financial planners one nightmare after another.
The same is true of fast-food customers. When given coupons for pizza, chicken or burgers often enough, they eventually learn not to buy such items without a discount. Discounting, contrary to popular belief, does not build product loyalty.
The sole purpose of discounting is to drive customers into the store. The rest – add-on sales, building customer loyalty and encouraging repeat visits – are challenges the store owner/manager must meet after the prospect arrives.
The trick is to discount in such a way that you do not sabotage the integrity of your menu/product. Disguise the lure so that it is perceived as something other than an attempt to discount your product or service.
Customers identify with products on a number of levels, including taste, appearance, aroma and, of course, price. Still others identify by brand, quality, availability, reliability. The customer always wants to get what they paid for, sometimes even a bit more.
But over time, discounting is bound to raise a question in the consumer’s mind about the integrity of your pricing structure. If an ice cream cone sells for $2.50 that tells the consumer an ice cream cone is worth $2.50.
However, if you continue to offer 50-cents-off-coupons, the customer begins to feel ice cream cones are worth no more than $2.00. If such promotions are continued, this will be the price your customers expect to pay.
Once a retail price has been selected, that price should never be discounted. A product’s price is part of its position in the marketplace, and discounting it will have a detrimental effect on the perception not only of that item but of your whole store.
The bottom line is that any promotion which weakens the integrity of your store’s retail price structure violates sound marketing principles.
If you are going to discount, you should put together a package separate from your regular offering, which will not negatively affect your customer’s perception of the value/price of your item.
In the case of new items, establish a retail price in your mind, then offer a reduced price as an Introductory Offer ONLY. After a pre-determined period, bring the price up to the retail level you had set prior to the discount.
Better yet, offer to give away one new free item for a limited time, which will encourage people to come into your store and, ideally, lead to sales of other items.
The fact is, discounting to an already-existing customer base offers no benefits such as increased trial or repeat business. Instead, it may erode years of positioning efforts.
If you intend to rely on discounting promotions, take a longer look at your operation. Don’t use discounting casually to build sales. The long-term effect will be reduced respect for you item and pricing structure.
Use these promotions to generate traffic during specific periods, to build interest in new products or even newly remodeled stores. And remember that, once you get your customers in the store, it is going to take more than a cents-off coupon to keep them coming back.