September 10, 2018

Marketing > Discounts

One of the smartest things I ever heard happened about twenty-five years ago.

Business wasn't great - and I'm sitting in a meeting where an Executive wants to take 20% off and "move some merchandise".

Another Executive looks at the first Executive and says, "We need to market our way out of this." The room (of course) is filled with blank stares. What is this person talking about?

Think of it this way. You could take 20% off and you'll move merchandise. You'll also train customers to not shop at full price again. Short-term gain, long-term gain. .cc: Macy's.

You can take the profit dollars you lose running discounts/promotions and instead invest in marketing. Greatly increase what you're willing to pay Google/Facebook to acquire customers. Run some TV and Radio spots. Sponsor podcasts. Hound customers all over the internet with retargeting tactics. But the goal is to overspend on these tactics ... you'll lose money (just like you'll likely lose money running discounts/promos) but you will generate new customers who will pay you back. And if you love catalog-centric business models, add mailings - you'll generate sales you wouldn't otherwise generate.

In other words, instead of giving away margin dollars, give away marketing dollars. Either way you lose money, but the latter allows you to grow your business at full price.

Smart, huh?

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