Piaras Kelly PR - Public Relations in Ireland

We had an interesting discussion last week in the office about discount vouchers which are being emailed on a daily basis by clothing retailers. It’s gotten to the point where female consumers are so overburdened with discounts that they can’t keep track of how many vouchers they have. There are a number of worrying aspects about this:

• Consumers are now holding off because they expect that even bigger savings will appear immediately prior to Christmas or in the January sales
• Retailers are devaluing their products to the point that when we see an economic turnaround, they will have a tough time to justify charging higher prices when consumers have become paying a pittance for them

The trouble with discounting is that it undermines your brand positioning. If you were a high end brand, it devalues your currency. On the other side of the scale, if your brand was meant to be centered on value for money but you were able to drop price further, it just opens the door for a new competitor to swop in at a lower price and leave you languishing in the middle. Competing on price alone (obviously it is still a key factor) will just lead to a bloodbath. Rather than swim with the sharks in the red sea, businesses should look to a blue ocean strategy and offer consumers something different.

The Amarach Research blog points to an interesting example. A Swiss taxi firm has adopted an “all you can eat model.” Customers pay a flat fee and can avail of unlimited taxi rides. I’m dubious as to their business model’s viability, but it’s interesting none the less.

A better example is that of Pizza Hut. A few years ago when the company was coming under serious pressure to compete on price, the restaurant chain decided to focus on value instead and created their all you can eat lunchtime menu. Their strategy paid off as the company found its own blue ocean and has enjoyed pleasant sailing for some time now.

One thing I hope we witness during the recession is a switch from a focus on customer acquisition to customer retention. Louis Columbus has a great post about using the recession as a “catalyst for delivering exceptional customer experiences Earning trust from customers takes a consistent, passionate level of commitment to delivering customer experiences above expectations.” On the same blog, John Tudor picks up on the same note and points out that people are spending more at Starbucks during the recession than they were before. Tudor reasons that this is because “it is a small personal indulgence that leads to temporary but worthwhile emotional lift. The experience is positive and under our control” and rightly goes on to set out the challenge for companies, which is to help their customers “deal with these emotional needs, help them gain a sense of control and give them a relationship that supports them.“

Marketing strategy in the current economic climate shouldn’t revolve around the thought of ‘How much to I have to drop the price of my good/service for it to be acceptable to my target consumer?’ Instead we should take a hard look at ourselves in the mirror and ask why customers should place a higher value on our good/service and purchase it ahead of a rival or substitute offer.