Should You Discount During COVID?

Why should companies care about discounting during COVID? I’ve been thinking a lot about this question. For the first time ever, I saw an 85% off discount in a store that was not closing. Discount sales clearly drive purchase behavior, but they also have negative trade offs. I want to share with you what I suspected and what I found out after researching this topic about discounting during COVID – as well as my own experiences. 

Go on Take the Money and Run

One direct to consumer shirt company I know used discounting as a regular strategy. They religiously pushed sales, all types of sales (e.g. “Father’s day sale, warehouse sale, graduate sale, and so on). If you transacted with this brand, it quickly became clear that you would never buy anything at full price when you could just wait for the next sale.

And that is a bona-fide strategy. We all love to get a great deal. But when this online retailer cut the introductory price too low, they sacrificed value and started acquiring customers who performed differently than their classic high value customer.

But when this online retailer cut the introductory price too low, they sacrificed value and started acquiring customers who performed differently than their classic high value customer.

The newly acquired shoppers expected the first shirt they bought at a deep discount to be the same quality as a more expensive shirt, and they complained bitterly when it was not. These complaints reached other prospects and customers who started sharing stories that the company’s quality had changed. Had it? No, but the sense that you paid a reasonable price for good quality eroded across both the low value discount shoppers and the higher value long term shoppers as a result of increased social media reviews from the new low-cost discount shoppers. 

So the question I’ve been thinking about is, should online retailers discount to drive up sales now and reap short-term revenues thereby offsetting crushing losses – or should they hold their pricing and maintain the values of the brand, perhaps strive to create deeper customer relationships, even if revenue is down?

Customer-Centric Thinking

Classic customer-centric thinking about discounting is that it’s a mass marketing technique. Discounts are not meant to build close personal relationships. Think about it. A close relationship is built on shared values, quality, friendship, service and communication. In the same way you wouldn’t give your neighbor $5 for a cup of sugar. It would be insulting. Instead, you’d offer a cup of coffee or a few flowers from your yard. Discounts send the wrong message to valued customers that we want to buy your loyalty, our products are overpriced, we don’t really care about you – we only care about your money.

Discounts send the wrong message to valued customers that we want to buy your loyalty, our products are overpriced, we don’t really care about you – we only care about your money.

But, I believe in the digital age, we CAN use discounts appropriately with our customer base. Maybe have our cake and eat it too. But it’s complicated. So I made a 2x2 grid to break it down.

I started with Demand – meaning the overall consumer demand for your products during COVID and crossed it with Data Analytics maturity – meaning how easily can your company understand customer behavior and make a change. 

Thank you for making it this far! You can find the complete article and the graphics which dig into which strategies to use in each quadrant on this page. You can also listen to this while you garden, hike or feed the kids on the Customer Equity Accelerator podcast.