Invest in your brand...not price promotions!

Harvard Business Review: Invest in your brand...not price
promotions! A recent article in the Harvard Business Review
had this to say: "Our research into the role of marketing
strategy in brand performance indicates that companies are
paying too much attention to short-term data and not enough
to the long-term health of their brands. They routinely
overinvest in price promotions and underinvest in
advertising, new-product development, and new forms of
distribution." (1.) Now retail thrifts are not well-known
for new-product development but most everything else in
this HBR citing had an application for us. And whereas
this article is chocked full of good information, there is
one especially-meaty point I want to focus on for a few
minutes.

Here's what it is-sales promotions may not supply the big
bang thrift retailers think they do. Admittedly, sales
promotion revenues provide a powerful lure to repeat
promotions but a careful study of shopper behavior suggests
that over time, a strategy of heavy utilization will
actually decrease profit margins. "Shoppers aren't naïve;
regular sales promotions encourage them to wait for the
next sale rather than purchase a product at full price."
(2) In short, sales promotions may drive spiked revenue
streams, but there is little evidence to suggest a positive
effect on total sales over time. The article goes on to say
that the total impact of discounts is only 80% of their
short-term effect. To say it another way, the effects
measured over the long-term are 20% less positive that they
first appear. By contrast, the long-term effect of
advertising can be 60% greater than its short-term impact.

So what do we do with this information? I guess it might
be this. In the rush to increase your revenues, don't
develop an over reliance on sales promotions-especially if
any level of predictability to the sales. Shoppers will
learn the pattern . . . and shop it. Over the long haul,
your revenue baseline will not appreciably increase. A
better practice might be to invest more heavily in getting
shoppers to come to your store then, impress them with the
quality of your brand. Retail thrift shoppers already
expect low cost items: that's why they shop you. Why not
limit sales but impress your customers with the total
experience. Have fun!

Leonard M. Lodish and Carl F. Mela, "If Brands Are Built
over Years, Why Are They Managed over Quarters? Harvard
Business Review, (July –August2007) p.105 Ibid, p 108

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