Deep Discounts During Recession Can Damage Brands
March 11, 2009 at 5:58 AM (PT)
Before you lower your ad rates in this difficult time, you should be aware that discounting prices deeply during a recession is a mistake, according to a new YANKELOVICH study, and can damage brands in the long run. Although price is a starting point -- products and services must fit into consumers' budgets -- consumers have negative reactions when brands discount their products and services in response to the recession, according to the DOLLARS & CONSUMER SENSE 2009 study, conducted in JANUARY 2009.
When asked what they assume when a brand lowers its prices during economic times like these, 70% of consumers responded, "The brand is normally overpriced," and 62% said they assumed that "the product is old, about to expire or about to be updated, and the company is trying to get rid of it to make room for the new stuff."
In contrast, when consumers were asked what they assume when a brand does not lower its prices during economic times like these, 64% reported that they assume that "the product is extremely popular," and 64% assume that "the product is already a good value."
"Lowering prices during a recession clearly raises suspicions among consumers," explains YANKELOVICH MONITOR Pres./Executive Vice Chairman of THE FUTURES COMPANY J. WALKER SMITH, Ph.D. "Drastic price cuts like those seen during the past holiday season create a double-barreled risk for brands. First, such price cuts generally fail to generate enough business to pay for themselves, although clearing inventory is of some value. Second, they create longterm difficulties in terms of consumer expectations."