It is Time for the Death of Discounts.

Some of you are irritated with me already. But if you hang in there we may come together on the idea.

Let's start by looking at why our culture encourages retailers to discount so much in the first place.

Why do companies give up so much of their hard to come by profits with discounts, coupons and giveaways?  Here are the top 5 reasons.

1. We-Too - It is almost expected from the giver’s point of view. I mean what coffee shop in their right mind doesn’t offer some sort of freebie card or club? Airlines? Hotels? Department Stores? Drug Stores? Can you imagine an airline or hotel today without a loyalty club? Monkey see, monkey do. These companies aren’t exactly dummies so why do they do dumb things? Because they can if they want to, or if someone high enough up wants to and can persuasively convince a few others. Or, because it’s what everyone else does and is an expectation (entitlement) of their customers. I recently went to the airport to return home from the same city a colleague and I were visiting. We were returning to homes in different cities. He is a less experienced traveler and didn’t belong to the airline club - yet he was flying first class. He just didn’t care to join another airline club - or any airline club.
2. The Math - Unbelievable to me but many companies just simply don’t bother to do the math on these types of expenses. They are budgeted as a marketing expense and anyone who questions them has to do battle with the illogical nonsense so they just don’t bother. There is an ongoing hate relationship with marketing expenses in most companies but it’s exactly like John Wannamaker said way back when (1800’s), “I know half of my advertising doesn’t work, I just don’t know which half.” Try to argue with a marketer and they belittle you and make you feel like you are failing the company by challenging them in a valiant attempt to mask their own ignorance of the absurdity. 
3. Bullied - Rather than suffer the wrath of a few customers  (unprofitable ones at that) or a few employees who don’t want to face them with the truth, companies “pay their dues” by working through resistance to reducing or eliminating discounts and then wear down and reinstate them. Or in some cases, they introduce a new layer of stupidity to make up for their blundered attempt to do the right thing that costs even more of their profit.
4. Flavor of the Month - When the CEO or someone in charge reads the latest edition of the trade magazine, goes to the mall, or attends a seminar they often come back with a plethora or just one deadly new idea. Their enthusiasm and persuading skills that got them where they are are activated and Heaven and earth move aside to implement it before anyone has a chance to figure out the unintended, but obvious, consequences that come along with the pros of the idea that everyone piled on during the brainstorming session.
5. Discount Culture. Think about whether you’re trying to sell the way you’re used to buying yourself. America has a deeply rooted culture of saving money. It is in all of us. And, it is dangerous when those of us who are responsible for pricing and profit aren’t cognizant of the effect of this culture because we have a tendency to sell the way we buy instead of the way we can, and should, if we not only knew how if only we could overcome the pull of the discount culture on our own decisions.

Fighting the Discount Culture

This problem goes all the way back to the early 1800’s and the days of the original mass merchant - Sears Roebuck & Co. and it is firmly engrained in our American culture. Sears was the original disruptor responsible for ghost towns and ghost downtowns. Thousands of homesteaders bypassed the mercantiles and went to the post office to mail in their orders and to pick up the goods they had purchased. Later their stores allowed us to bypass the post office and go directly to the local Sears store. The one-stop shop, choices of quality and price (Good-Better and Sears Best), and friendly staff, including people like our own Mr. Nice Guy himself, Danny Summers, who worked for Sears way back when.

The past recession reignited the passion of retailers to discount, the same as every recession does. The ill effects of discounts, deals and coupons (hereafter in this article referred to singly as “discounts” as in discounts from full margin and profit) has taken its toll on retail. Consumers became frugal-fatigued several years ago and are over it, yet retailers are addicted, fooled by their own culture for it, and can’t kick the habit. Even the best of the “mark it up to mark it down” retailers are being challenged by their so-called “loyal” customers and they now cannot get them to buy without a deal (if they buy at all) because they don’t trust them anymore knowing everything is marked up to mark down. If you become serious about erasing the effects of this culture you will be enabled by reading the book, “Cheap - the High Cost of Discount Culture by Ellen Ruppel Schell. I hear it is on sale now on Amazon (just kidding).

Recognizing the Cycle

Discounts are an addiction. This is not an understatement. Our culture is so strong with discounting that it is a self-reinforcing ever-expanding cycle. Everywhere you look, listen and shop there are discounts, coupons, giveaways, and a plethora of gimmicks that systematically drain profits before they are ever earned. This is not going to be easy. If you’re ready to admit you have the addiction, or at least would like to know the seven deadly signs of it then read on.

Breaking the Cycle - Discount Recovery

Just like any other addiction there has to be a plan to go along with the decision to stop doing whatever you’re addicted to do. Here are a few of the 12-Steps to Discount Recovery.

Recovery Step 1 - Switch Vocabulary

It is necessary to replace the words you’re using that reinforce the former culture to new words that build a new culture. Call a special meeting to symbolically and ceremonially have your circle of associates and family each write down the words “discount, coupon, and deals” on a piece of paper. In unison crumple those up and throw them into the trash can. Now write the words “BUILD VALUE” boldly on a large bright colored Post-It notes and put them up at each person's primary work station. You may want to go further and put them up other places such as next to the time clock, and on a bigger sign in your back room.

Recovery Step 2 - Switch Practices

Changing a culture is a big job. It has been said that it takes seven years to change a culture. This doesn’t mean it takes seven years to change your practices. The practices reinforce the change you are trying to make, but you must stay your course. Start with the practice of marking up replacing the practice of marking down. It’s not that you won’t still need to mark down but if you build the habit of marking up where you can build value this will go a long way to eliminating the need to mark down later.

Recovery Step 3 - Pay Your Dues - Resist the Resisters

When you decide to do something instead of something you always did some people will want the old back again. Some of them will be adamant and bold about it. This can be anticipated and requires preparation with a firm explanation worked out in advance.

For the very hardiest of resistors you may need to tell them to get over it because you have heard them and have decided that you are moving forward. But begin with how you go about making a change. You can probably identify who will have a problem so you may as well begin well in advance by involving them in the change that is about to occur so they can understand the need and the process.  Truth is that leaving them out early is the root of later problems.

Recovery Step 4 - Change Safe

Distraction is your friend. Change in ways customers don’t notice. Introduce something of noticeable benefit to the customer when discontinuing something else. This is simply doing what you are supposed to be doing anyway - building. Consider improving your facility in a tangible way. These types of improvements have an up-front cost without the long-term ill effects of discounts, and customers tend to appreciate them more. Besides that, most businesses have a long laundry list of deferred maintenance items and updates that need to be made anyway, and many of these can be funded by simply discontinuing some discounting.

We’ll continue the recovery steps next time. Until then, let’s focus on what we’re supposed to be doing and Build Value.

Your friend,

Sid