About the benefits and dangers of discounts
What is a discount and what is its nature?
Without falling into the complex vicissitudes of marketing terminology, we can assume that the discount is the sale of goods at a discounted price (formally or in fact). With a number of reservations, you can even consider discounts as a kind of economic dumping.
Analyzing the essence of discounts, first of all I must say that this is an invention of the XX century. If we study the Russian pre-revolutionary historical traditions of sales promotion, we will not find any discounts in the classical sense of the word. In addition, today's researcher needs to proceed from the recognition of the unity and interrelation of the discount system with the development of the relatively modern concept of "unique selling proposition (USP)". Without understanding the nature of UTP, it is almost impossible to understand the nature of discounts.
So, starting from the second half of the XX century, the market was filled with a variety of products. And if earlier production was developing based not on the needs of customers, but on the ideas of its own economic feasibility and partly on the principles of subsistence farming, then, faced with a commodity surplus, the manufacturer, before producing something, began to think about whether the consumer needed this product. But the product was still getting bigger, but in the meantime the market was saturated more and more intensively.
It was here that Rosser Reeves’s work “Reality in Advertising” arrived, in which he substantiated and described the essence of UTP. The main theses of his ideas boiled down to the fact that:
1) each advertisement must contain a specific offer for the consumer: buy this particular product and get this specific benefit;
2) the proposal must be that which the competitor either cannot give or simply does not put forward. It must be unique. Its uniqueness must be associated either with the uniqueness of the product, or with a statement that has not yet been made in this field of advertising;
3) the proposal must be so strong that it can attract new consumers to the consumption.
Of course, with the development of advertising, marketing and PR tools, his proposals were refined, updated and displayed the current position of the moment. But the main thing has remained unchanged - the unconditional acceptance of the position of his idea about a unique set of characteristics, one can say "commodity zest" in the product offered to the consumer.
Meanwhile, Rosser Reeves would probably be surprised to learn that for the most part the main form of the implementation of his ideas on UTP is discounts.
Naturally, discounts are not the same everywhere and not in everything. We further carry out their classification.
And what are the discounts?
Analyzing various options for discounts, we can identify three main criteria underlying the classification of discounts.
In its most general form, on the basis of a general criterion, discounts can be divided into the following types.
Segmental. Their essence boils down to the fact that the discount is due to some particular circle of people or a social group. These can be schoolchildren, retirees, representatives of some organizations and institutions 1 . Thus, the division here is based on status and social roles.
Temporary. Temporary discounts are associated with the specifics of their provision in a specific and specified time interval. This may be the time of day, season, holiday dates, etc. As an example of segment and temporary discount systems, we can cite a special program of the Grossmatr supermarket chain, which involves giving a 10% discount to retirees on weekdays from 9 to 14 hours (Fig. 1).
Saving from costs. Still, it is necessary to understand discounts not only as USP (or its distortion, which will be discussed further), but also as a form of salvation from costs. It seems to me that the use of discounts is justified in the event that they contribute to the financial recovery of the organization. That is, if we see that a collection of clothes or shoes is stale and it is urgent to get rid of it, in order to free it from the place and offer new collections for sale, then the use of discounts is justified and justified.
Hidden. This is perhaps the most ridiculous kind of discounts. For example, a person goes to buy a washing machine and, having already chosen her model and going to pay for it, learns that a discount on it is, say, 5%. And besides, the person who bought the washing machine receives a heater as a gift, which, when turned on, smells awful with engine oil. Understanding the nature of such discounts, as well as the motives of marketers who plan and approve them, is extremely difficult.
Inconsistent. These discounts are primarily ill-conceived. By providing them, merchants, as a rule, have no concept or plan, and consumers do not know exactly whether they will be given a discount or not. In terms of content, something unites inconsistent discounts with hidden ones.
It is quite natural that each of the above types of discounts may be supplemented or overlapped by another type of discounts. So, segment discounts can be temporary and save on costs. And hidden discounts may be inconsistent.
If we take as a basis for the classification of discounts the criterion of their content , then we can distinguish the following types of discounts.
Actually price discounts , i.e. real cash discounts. The discount amount is agreed in advance, and the buyer knows in advance its size. This is the most common type of discount in the practice of modern retail. Such discounts often arise during the organization of publicity to all sorts of sales, arranged, however, quite well-known trademarks.
For example, from January 15 to February 15, 2008, the Jewelry Network "585" held a promotion with the possibility of discounts of up to 50%. Although, of course, there are very few such items for which the discount would be 50% compared to the rest of the product line. Further developing the idea of the feasibility of selling gold and silver at a discount, it can be argued that the sale of jewelry is a rather dubious idea. Jewelry is not a popular product that is sold when it is hot. As long as humanity exists, gold and silver are more or less absolute values (Fig. 2).
Alternative quantitative discounts imply “consumer compensation” for the goods purchased, not in monetary terms, but in goods. If you use advertising and slogan appeals, then it looks like this: "When you buy five liters of Fat Beer, you will receive one and a half liters as a gift!" Also, as an example of alternative quantitative discounts, we can cite such an option rather empty in terms of the content and availability of the TSS of the RusBank advertising call: “Open the contribution and your gift!”. If the client decides to open a deposit, then, being adequate, he first of all looks at the interest rates on the deposit, but not on the gifts from the bank (Fig. 3).
And the last classification of discounts, which we consider, is based on a number of state imperatives, i.e. The criterion here is the degree of state regulation of the price turnover . There may be two options.
The first is when the state forms a special price i.e. the real commodity discount (you can even talk about dumping) is established and controlled by the state.
An example of such a social discount is a kind of collusion at the highest level of the state with representatives of the largest retail chains in order to prevent price increases in the context of inflation for certain groups of goods.
The second is, respectively, when the state does not interfere in commercial activities, and the discounts themselves are voluntarily established by market players. Since we live in a country with a market economy, it is only natural that this option is the most common.
What is the reason for the popularity of discounts?
I suppose that the reason for the popularity of discounts in Russia lies in the psychology of consumer behavior of Russians and their mentality. When purchasing any product at a discount, the buyer very often very well understands that his 5-15% discount is already included in the price of the purchased one. But this does not stop him, and he still goes and buys where he is promised a discount. All this, in my opinion, can lead to a large-scale psychological obscuring of the consumer, when the thirst for cheapness makes buying something not because it pleases, but because the buyer is offered a discount or a gift.
Well, from a marketing perspective, it is important to understand that simple thing, that a discount is something secondary, it is not the primary goal. The discount is only intended to complement the integrated concept of marketing tools, stimulating sales. But it is to complement, not replace. Meanwhile, the reverse process is taking place - discounts and the game on discounts replaces all other promotion options.
As an example, an advertisement for “Stanichny bikes” seeds, produced by AgroSoyuz, through the campaign “Find a seed of gold and get a chain for it as a gift”. The question is, where is the logic?
What do we sell at a discount? Outdated collections of clothes and shoes that should be replaced by a new model range, perhaps some kind of second-rate products (as an option: beaten apples and pears, half-rotten apricots) But if we look at advertising, we see that 80% of the TSS advertised is based on the offer of discounts.
Why discounts are bad?
Discounts like UTP are bad, because almost everyone has this form of uniqueness. Discounts are the most primitive form of personalized product positioning on the market. It comes to the fact that the category of discounts is laid in the advertising name of the trademark. As an example, I will cite the chain of stores "Tsenopad" (Fig. 4). I do not rule out the appearance in the near future of a chain of stores that will be called, say, Skidochka, Cheap, etc.
Generally, if you continue to analyze how shops selling clothes and shoes build their trading position on the market, then nothing else but a game of discounts can be found here. Here, for example, shop Terranova. The announcement of a 90% discount on the shop window is only one thought: the product offered is of poor quality, and we must get rid of it as soon as possible (Fig. 6).
It seems that the discount epic has captured even the banks, which makes them make consumers rather strange proposals for serious financial institutions. You take a loan - you get a gift, well, is it not monstrous logic? If a person decides to take a loan, then, as has already been said, he is guided not by generous gifts that banks offer to their customers, but by simple economic logic: what is the interest rate on the loan, what is the amount of the lump sum commission etc. 2 (Fig. 5).
Building a brand, and not a momentary trademark, will not go far on discounts. It is necessary to search and develop complex, uncopyable marketing competitive advantages.
Why is the whole marketing concept of most stores based on sales and proclamations of the fact that they have the cheapest products? Moreover, as a rule, the discount is included in the price of the goods. It is naive and ridiculous to think that the buyer does not understand this. Although of course the problem lies in the characteristics of consumer psychology.
Roughly speaking, a discount can be justified only in one case - when the store gets rid of low-quality products or sells, for example, outdated collections of clothes and shoes. But I do not believe that all the stores turned into one big flea market and began to sell junk at reduced prices.
To look for competitive advantages is necessary today not in discounts, but in the quality of products and services. The competitive advantages, on the basis of which the brand should be built, may be different, for example:
1) the possibility of paying for purchases with a plastic card by bank transfer (this form of payment is not practiced enough, especially in the regions);
2) a more convenient delivery system for large-sized equipment (so that he does not sit at home all day and does not wait until his purchase is brought);
3) focusing the buyer's attention on the convenience of the store's location (next to transport stops or in the center);
4) competent merchandising system;
5) focusing on the tradition of sales in the store (some shops are located in buildings where trade has been going on for more than one century);
6) any other competitive advantage, offering which, the seller appeals to the mind of the consumer, and not to his desire to get some free cheese.
The general conclusion is as follows: the idea of UTP is very much distorted and distorted by the modern Russian retail sphere. To be competitive, it is necessary, when developing something new and unique, to think, and not to copy the practiced forms of discounts and to exhibit them as your own UTP.
1 Corporate discounts are also included in the segment category. They arise when either the management of company A makes an exclusive contract with company B, whose services it uses, or company B itself, interested in marketing products or providing services, enters company A and forms a corporate “discount chain”.
2 For the sake of justice, it should be noted that such logic still takes place at the elections: if you have time to vote for lunch, then you get a pencil case or pen as a gift.