THE BLOG
11/25/2014 02:10 pm ET Updated Jan 25, 2015

The Race to Zero: Time to Rethink 'Discount' Mentality

The running joke in the retail world is that the battle to entice shoppers with heavy discounts starts earlier each year. It's no longer a matter of deep discounting on Black Friday, or even Hurry-Up-and-Finish-Your-Turkey-So-We-Can-Start-Shopping Thursday. In fact, a recent Google survey finds that half of all shoppers start scouting for deals before Thanksgiving -- 26 percent of them even start before Halloween. Retailers are more and more extending Black Friday-like discounts through at least the entire month of November.

Who doesn't love a deal? David Ogilvy wasn't a big fan, or at least he wasn't very keen on brands partaking in them. "Any damn fool can put on a deal, but it takes genius, faith and perseverance to create a brand," the late advertising legend said at a New York City luncheon in 1986.

But here we are, already into the holiday season, a time of family gatherings, peppermint lattes and deliriously deep discounting. But beware marketers: From a brand equity perspective the implications of "discount creep" on brands should not be overlooked. Discounting will give retailers a short-term advantage over competitors, but it can come with perhaps unforeseen consequences.

Truth: Leading with low prices cheapens your brand. Sure, people will rush out to buy your product, prompting a spike in sales. But at the same time, customers will be so focused on price they will lose sight of the intrinsic value in paying full retail price.

The biggest risk to relying on discounts to drive sales is that it becomes the definitive narrative in your brand story. "On sale": Are those the words you want instantly popping in heads when consumers think about your product? Maybe they'll think, "I'll wait to buy, it'll be on sale again in two weeks", or they'll wait for that time of year when your category is in discount land. And how 'bout everyone's favorite: "BOGO"?! As Entrepreneur's Dan Kennedy and Jason Marrs explain in the The Dark Side of Discounts: "When you offer a discount, you are taking the focus from the value you provide and placing it squarely on your price. There is no way to escape that." And even after the sale ends, the customer will continue to evaluate your product in terms of price instead of centering his attention on a more enticing benefit.

When selling on price, you're not selling on a product's unique attributes. Worse still, you're not selling on emotional benefit. The more scientists understand about human behavior, the more they understand that basic motivational forces, based on primal desires and fears, determine our actions. What makes branding a powerful tool is the way it uses the psychology of images, words, colors, fonts and patterns to fill a product with value that transcends rational calculations. Does the product add experience, create a memory, spark a wonderful feeling, enhance a moment, inspire personal growth? Does it foster feelings of belonging, worth and well-being? Engaging in a discount-focused strategy neglects the power of brand and is likely destined to fail over time.

As discounting has become more prevalent, many have forgotten that making a sale should not be about discounts and concessions that devalue your brand. Instead, it is a challenge to create more demand within your target audience to inspire purchase at the posted price. Ogilvy was a master at creating an insatiable demand for his client's products, making everything he sold a must-have, from Hathaway shirts to Rolls Royce.

What consumers demand from brand is not unlike what they expect from a good friend -- to show empathy and kinship, to engage on a deeply personal level. A good friend plays an active role in your life. A good friend is fascinated by what you have to say, makes your moments better, your experiences more interesting and helps gear your creativity into overdrive. The guy who does none of these things but offers to pay for your beer -- that's an acquaintance. And at some point when the tides change you'll think, "Hey, wasn't that the guy who used to buy me beers but now doesn't (a la JC Penney circa 2012)? Screw that guy!"

Granted, luxury brands (real or perceived) have a better shot at defending their price position. Let's give credit to a brand like Perrier, the French mineral water. The now iconic green teardrop-shaped bottle, the chic logo, their 24-year-old status as the "official bubble" of the French Open -- has all reinforced the brand's personality: Elegant, glamorous and oh so French.

Like many brands, Perrier is looking to expand its consumer set. Perrier could of course entice new natural mineral water sippers through discounting. Perhaps a social media campaign that offers a taste of the elegant life through a buy two get one free deal. Now they could try addressing a new audience by putting on an ultra hip façade. Such a move would not jibe with Perrier's identity as a stalwart of class, unapologetically cool and timeless, and would come off like Charlie Rose eating tacos with Justin Bieber on the street in Brooklyn. Discounting and tactical pandering result in brand dilution, and losing your brand's identity is one-way ticket to irrelevancy.

So what does a brand like Perrier do? They go deep in their ethos and find fresh ways to elevate the brand and keep it relevant. Recently, Perrier teamed up with contemporary artists on limited-edition series of Perrier bottles, including Agnès B, Sophia Wood, Paul & Joe and burlesque beauty Dita Von Teese. The stylish designs add to the Perrier narrative, with just the right amount of sex appeal and chic glamour without losing any of the sophistication. "The newsprint pattern of the Paparazzi décor beautifully reveal Dita's vintage sensuality and underline the legendary pleasure experienced with each sip of Perrier," the water giant said in a press release. Newsprint pattern, paparazzi décor, right brain emotions -- and right on brand.

In addition to the limited-edition bottles, brand initiatives such as Societe Perrier, a series of high-end lifestyle sites devoted to "what's hot around the world" in nightlife and culture, reinforce the core identity of elegance while providing an added value -- being a fashionable, sexy and in-the-know friend. By focusing on elevating their brand through smart packaging, positive associations and high impact content, Perrier has experienced a resurgence, selling one billion units in 2013 in over 140 countries.

In a world where a CEO's life expectancy averages well under five years and brand marketers are measured by short-term financial results, the seductiveness of selling out to sell more is hard to resist. For a long-term strategy, consider striving for the things that create brand value. Otherwise it becomes a race to zero. And that's no way to spend the holidays.