The madness of this year’s Black Friday has calmed down… until Christmas Eve when most men do their shopping 🙂
Regardless of how you feel about the rush to get a deal on the start of the ‘official’ season, Black Friday is a great example of the danger of offering a discount in a business. The origins of Black Friday are up for debate, it is an Americanism traditionally following the day after Thanksgiving. With this holiday came a crowd of consumers, and it also signified the first day of the Christmas shopping season.
It is considered one of the most important days in the retail calendar and the ‘black’ sometimes refers to the fact that many stores enter the ‘black’ in terms of moving out of a situation of financial loss (‘in the red’).
Retailers offered discounts in order to draw shoppers into their stores to spend money. This quickly spread and a ‘discount war’ started where competitors tried to out do each other with the deals they offered in hopes that the shoppers would spend their hard earned cash on full price products in their stores in order to make up for the losses.
In retail at least, it has become more about retaining market share and relevance than getting ‘back in black’. Great for shoppers, debatable whether it is actually good for the shops.
Dangers of a Discount
Special offers, introductory prices and partner rates should all be used strategically and most importantly, with caution.
As consumers we have all been trained to look for the best deals and the cheapest prices but by discounting our products and services we are doing some very interesting things with the perception of our business.
Price over value is never sustainable. If you compete on price, the only way you can go is down. Margins shrink and you start looking at ‘loss leaders’. If you compete on value, the only way you can go is up. Price (and margins) stay the same but by offering more for the same you ‘add value’ (Sorry Jon). This is sustainable as the added value can be worked into your business.
Discounting leads to a loss of trust. If you discount you are actually saying, “We can do it at these prices”. You are in danger of losing customers when the prices go back up. Customers who once bought from you might be surprised at the actual prices and go elsewhere.
It is much better to be upfront about the costs and refuse to ‘price crumble’. This solidifies that you are offering a fair price and are providing real value.
Teaching your customers to look for ‘more for less’. Wouldn’t it be great if we could do what we do or make what we do for free? Sadly, we can’t. There is a cost for most things, whether that be manufacturing or time.
By discounting you are effectively training your customers to drive the price down, rather than budget correctly and make the correct decisions. The onus is put on you the business to try and match customer expectations rather than set those expectations.
Value over Price
The interesting thing is that price is not the deciding factor of interest. That would be need. Extreme example, how many dentists do you see offering a discount? Buy one filling and get another free? They don’t do they? This is because there is a genuine need that needs to be addressed… even if we wish it wasn’t so!
Need another example? Apple places itself at the pinnacle of technology and innovation, fulfilling this high value need. Its prices reflect this. Black Friday discounts would be actually damaging to their brand. If you pop over to the Apple store, you will see that they are competing not on price but value.
This is what they are doing:
To honour World AIDS Day, every product we sell today will support (RED)®.
Today, we’re contributing a portion of the proceeds from every product, accessory and gift card we sell at the Apple Retail Store and Apple Online Store to the Global Fund to fight AIDS. And when you buy or make in-app purchases in any of the special Apps for (RED) up to 7 December, we’ll donate 100 percent of the proceeds.
This started 24th November, which ‘co-incidentally’ covers the Black Friday period. What Apple is doing here is saying,
“You can get other stuff cheaper elsewhere but at Apple you can help fight AIDS”.
Which would you prefer to buy?