andy-wood.biz

I read an interesting story on The Drum this lunchtime. Book store Waterstone's is scrapping it's 3 for 2 deals on books from today and instead concentrating on discounting individual books. The offer had been running for over a decade.

It is an interesting concept and one that is surprising considering the amount of research and effectiveness case studies (particularly from behavioural economics) against the route of discounting.

Although effectively it was it's strongest performer, HMV was forced to sell Waterstone's to raise cash. For Waterstone's (now under new owners) which has been struggling with like for like sales recently, I feel it is a strange tactic to be taking. Ok I'm on the outside looking in but other than increasing sales volume when we look at how discounting affects profit and perceived value the effect can be detrimental especially to the bottom line.

Perception

I would worry about the perceived value of the brand through discounting. We as humans make irrational decisions, we are effected emotionally and because of that we will put a percieved value on products. By discounting we are saying that our products are actually worth less. We as consumers question why the goods are discounted until eventually we don't buy goods at all, waiting for them to be discounted.

Even during the recession, brands that decided not to discount were still found to be far more profitable despite selling less than brands that were discounting.

Joules is a brilliant but unfortunate example of this. A potentially brilliant brand yet I find myself being constantly plagued by discounted offers. I no longer wait to pay £32 for a polo shirt, I now wait for the sales when they are £20. I probably would have bought the polo shirt at £32 however I know that there is a considerably lower price to be found if I wait.

Instead if they had offered say FREE postage (as behaviourally we all react to FREE) I would have bought two items and they would have lost a lot less compared to discounting product.

Investing emotionally into brands, getting that perceived value stronger, is a great tactic. Lets face it, you will never see an Apple product discounted will you? Investing emotionally is also something which Richard Carrick, former CEO of MyTravel agrees with too.