Battle of the bargains: Implications for brands and marketers

ILLUSTRATION BY RUTH MACAPAGAL

A bargain refers to a favorable deal in which products or services are acquired by customers at a lower cost than usual. It can take various forms, such as outright price reductions or sales promotions like “20 percent more,” “Buy 2 Get 1,” free delivery, special offers and more. It can also encompass added value, like advance or special event invites, making transactions advantageous for consumers.

Malls host three-day sales each month, attracting local shoppers to various branches. There was an e-commerce surge during the pandemic, but now, customers are returning to retail stores postpandemic. This has led online stores to work on attracting customers back due to the lack of in-person benefits. Leading online platforms ramped up monthly promotions, attracting a broader audience and saving consumers time, effort and money.

Elsewhere, evident among the savvy shoppers are the much-anticipated bargain extravaganzas, such as the Black Friday Sale and Cyber Monday Sale. These two events follow the Thanksgiving celebrations in the US and have become synonymous with incredible deals.

On a grander scale, we bear witness to China’s record-breaking 11.11 Singles Day Sale, a phenomenon curated by Alibaba and JD.com. This annual event has ingeniously transformed into a monthly tradition in the Philippines, with the captivating 9.9, 10.10, 11.11 and analogous monthsary sales that have maintained popularity. The phenomenon serves as a testament to the shifting consumer landscape and the remarkable opportunities businesses are leveraging to capture the wallets, and hopefully, the hearts of the market as well.

Why offer bargains

Amid evolving consumer landscapes and fierce competition, the role of bargains has become pivotal. Discover the compelling reasons that lead businesses to join offers in discounts and promotions, reshaping the dynamics of marketplace success in today’s market.

Boost sales: Bargains stimulate sales during slow periods, enhancing revenue and cash flow by revitalizing business activity.

Create excitement: Bargains evoke a sense of smart shopping, triggering satisfaction and excitement. The pursuit of valuable items can also alleviate guilt associated with excessive spending, fostering a delightful shopping experience.

Win market shares: Offering better deals attracts price-sensitive customers actively seeking value, thus expanding market reach.

Create urgency: Time-limited bargains tap into psychological aspects, igniting a sense of urgency that encourages impulse buying and heightened online engagement for maximum impact.

What bargains can’t do

Bargains are not a magic pill and have many limitations and misconceptions. These are some of the realities of what bargains cannot do and the boundaries uncovered beyond the allure of discounts.

Customer loyalty: Bargains don’t convert disloyal customers into loyal brand enthusiasts. Incentivizing disloyal customers won’t guarantee brand stickiness. A deeper emotional connection is needed.

Repeat purchase: Offering a big bargain doesn’t guarantee regular price purchases. Bargain hunters differ from quality-driven buyers in their purchasing habits.

Competitive edge: Bargains neutralized by competitors won’t provide a differentiating edge, and may eventually culminate in the most intense price and promotional warfare, diluting both profit and brand image.

Brand equity: Relying on repeated bargains might lead to negative brand associations. Maintaining brand equity requires a strategic combination of uniqueness pull and tactical push.

When to offer sales promos

Concessions can be useful in certain situations. The intricacies of optimal timing for bargains can be explored, especially how a well-timed offer can unlock outcomes for the business in these cases.

New product: Promotions introducing new products can generate interest, reduce buying risk and encourage trials, jumpstarting a quicker market foothold.

Incremental volume: Targeting new buying levels may increase consumption by exposing the product more frequently. This can enhance product engagement and influence consumer behavior positively.

Excess inventory: Clearing inventory reduces costs and storage space, and boosts cash flow to maintain efficient operations.

Defense marketing: Justified during new competitor launches, bargains can deter consumers from trying the products of a primary rival or a credible substitute, disrupting the market penetration goal of the competitor, discrediting their leader’s credibility within their organization, while safeguarding their own market share.

When not to offer bargainsThere are considerations that guide the decision-making process when it comes to withholding discounts, supporting the strategic wisdom behind such choices.

Price-insensitive scenarios: Customers often exhibit a willingness to pay the full price, especially during periods of heightened demand such as special occasions, holidays and bonus seasons. Similarly, instances of limited inventory or capacity shortages, along with customized orders, provide opportunities for commanding full value. In such contexts, extending discounts could inadvertently lead to revenue underperformance.

Perceived value and exclusivity: In cases where a brand is closely aligned with notions of superior quality and exclusivity, the implementation of a regular bargain strategy could potentially undermine the premium perception of an offering. Moreover, the appeal of exclusivity and the esteemed status tied to acquiring products at their full value might diminish in the presence of frequent discounts. This consideration calls for a careful evaluation of the impact on brand perception.

Competitive landscape: When rivals seldom engage in discount practices, a persistent pattern of discounting by a brand could raise doubts among customers. These doubts may extend to questions about the caliber and market allure of a brand when contrasted with competitors. It’s essential to contemplate these implications when navigating the competitive terrain.

Thin profit margins: Should prices already be positioned at a comparatively modest level, coupled with thin margins, the introduction of frequent discounts carries the potential to erode profits. This erosion, in turn, could present formidable obstacles to the sustainability of business operations. Deliberating on these ramifications is crucial as a brand navigates its pricing strategy.

Implications for brands

Participating in frequent bargain sales has implications. As we conclude, consider how brands can harness these insights to navigate the delicate balance between value-driven offerings and brand equity preservation.

Consumer behavior shift: Nonprice-conscious consumers delay purchases, becoming promo-conscious due to perceived good deals, making it necessary for brands to adapt to changing purchasing patterns caused by them.

Loyalty shift: Brand loyalty and channel loyalty goals differ between manufacturers and retailers, each carrying implications for the dynamics of power within the trade, each needing to balance these differing loyalties for win-win market cooperation.

Brand positioning shift: Brands can be perceived as discount-driven, shifting from value-focused positioning. This requires brands to uphold their brand identity, while capitalizing on short-term gains from participating in bargain offerings.

Competitive shift: Frequent price reductions might prompt competitors to follow suit, altering the price dynamics in the marketplace permanently and irreversibly.

Implications for marketers

Marketers face implications to ensure a resilient and thriving presence in the dynamic marketplace.

Strategy shift: Abruptly not joining monthly bargains can affect trust when consumers come to expect periodic discounts as part of their shopping experience.

Value proposition shift: Similar bargain products can erode the tradeoff between brand uniqueness and price, prompting a reassessment of the brand’s overall value proposition.

Offline-online shift: The frequency of bargains may alter consumers’ channel preferences, triggering jealousy and fostering negative emotional connections among other channel members, necessitating a delicate balance between offline and online interactions.

Innovation shift: Continuous bargains may divert budget from other strategic initiatives, potentially hindering innovation efforts.

While bargains may be the easiest option marketers use to increase sales and market shares and/or create excitement and urgency, it is always prudent for marketers to always examine the different contexts and the possible repercussions to recognize the cues that make short-term gains appealing but also risky.

—CONTRIBUTED

Josiah Go, chair and chief innovation strategist of Mansmith and Fielders Inc., will conduct the 108th “Marketing Strategy and Plans: Right to Win, Play to Win” seminar on Sept. 25 to 29 at 9 a.m. to 12 p.m. In addition, his new course “50 Ways to Fight Low Price Attacks” is available to existing clients with at least 20 participants. For details, email [email protected].