Wednesday, December 15, 2010

Holiday Sales Are Bad for Business

When I meet with a client, say a heating and cooling guy that has been advertising specials and coupons, I usually ask them if they want to be known as the "low cost coupon guy" and most say no.

Here's why, from Business News Daily:

Holiday Bargains May Not be Good for Business

Slashing prices may seem like the only way to bring bargain-hungry customers through your doors this holiday shopping season, but in may be detrimental to your business in the long run.

That’s the conclusion of a researcher who says that when businesses continue to give away profits, they are selling out their own future.

“When a brand goes on sale, it gives away part of the profit margin needed to invest in future innovation and quality,” said Sheri Bridges, associate professor of business at Wake Forest University. “This affects the consumer’s satisfaction in the long run because the company cannot afford to develop the newer and better products we all want.”

Bridges contends that if firms keep giving away margin they will eventually have to reduce the quality of their goods and services.

“Too many brands think the only way to get and keep customers is by cutting prices. In reality, consumers are more interested in high value than low prices. Value is a function of the bundle of perceived benefits offered at a given price. Apple doesn’t discount its products, but it’s still one of the hottest electronics brands around.”

Continual price-cutting conditions consumers to wait for sales before making purchases and sends a message that, in the company’s eyes, the brand is not worth full price.

“Selling products at a discount is like paying someone to like you,” Bridges said. “Good marketers know that sales aren’t necessary, if you’re providing the right value to the right customer.”

By Jeanette Mulvey, BusinessNewsDaily Managing Editor

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