The Price of Discounts

Mar 29, 2023

Discounts are like a drug with an almost addictive quality for both brands and consumers. They’re easy, impermanent, flexible, familiar, and able to deliver that much-needed momentary spike in sales. Like drugs, discounts can do a lot of good when used appropriately, at the right levels, and on the right people to address a specific symptom with immediate effect.

But also, like drugs – when overprescribed, used for unintended purposes, at excessive dosage, or for too long – they can be counterproductive and even harmful to your program and brand. They create a cycle of dependence where the business becomes reliant on them to achieve desired outcomes. They create growing tolerance that requires ever larger discounts to achieve the same effects. They have negative effects on the brand if not used responsibly such as reduced profit margins or diminished product perception. They’re difficult to quit with withdrawal symptoms like decreased sales or dissatisfaction. They reinforce bad behaviors like customers waiting before buying or requiring a discount high before feeling satisfied with a purchase.

By contrast, when brands and programs offer a diversified mix of incentives, they can expect lower program costs, less margin dilution, increased program effectiveness, and healthy customer expectations for authentic, reciprocal relationships.

Read the full Kobie Perspectives Whitepaper below: