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Do Marketing, NOT Markdowning
They Are Not One In The Same

Mallory Schlossber, a retail reporter for Business Insider, recently shone light on a disturbing retail practice that makes me want to pull my hair out (fortunately I’m bald so I didn’t inflict any personal pain.)

She expounded upon retailer’s prevalent use of a “Final Sale” strategy, and correctly referred to it as a “desperate measure” while warning that this practice will lead to increased customer backlash.

“Final Sale” refers to steep discounts on merchandise that can’t be returned once purchased. While Final Sales may be an effective promotional strategy to purge out-dated inventory or clearance items, its use has now become rampant as retailers scramble to do seemingly anything to grab consumers’ attention. In addition to the customer “piss off” factor of not being able to return items purchased on Final Sale, the sheer overuse of the Final Sale tactic by multiple brands throughout all seasons is a big reason why this strategy is backfiring. Retailers are losing even more margin from customers who were willing to pay higher prices, while at the same time the tactic is failing to lure in new customers in sufficient quantities. Wendy Liebamann of WSL Strategic Retail says, “Final Sale has really lost all its power”.

I read Mallory’s article the same day I spoke with the CMO at Canada Goose. Canada Goose is nearly 60 years old and is by all accounts an extremely successful outerwear company. It also never goes on sale. In fact, it rarely advertises. I marveled as their CMO explained upon all the ingenious things Canada Goose does to provide and communicate value to both internal and external audiences. In a nutshell, Canada Goose does real marketing, and as a result, they reap the benefits of cult-like followers.

So many potentially awesome brands have ruined themselves with their unholy addiction to markdowns.

So many potentially awesome brands have ruined themselves with their unholy addiction to markdowns. Worse, they’ve caused their customers to become addicted as well. Many of these brand leaders now feel trapped, and don’t know how they can wean themselves off of the promotional drug. Others excuse their harmful actions by referencing notable failures, like JC Penny’s attempt to limit sales, and rationalize that their only course of action is to continue with their bad behavior. But there are far more examples of brands that are failing from overdosing on margin-eroding bad habits. The symptoms are clear. Just look at the brands that have filed Chapter 11, and then go back and track what percentage of product was purchased on discount. Brands that increasingly rely on the repeated use of markdowns are not healthy. Either they are buying and selling products or services consumers don’t actually want, or they are failing to create meaningful brand interactions that actually engage consumers and create preference. The need to lower prices is almost always masking a bigger problem. Consider this:

Early in my career I worked for a Fortune 100 retailer attempting to sell a newly added SKU. The SKU, priced at $69.99, wasn’t meeting its sales projection, so the Marketing VP authorized a $20 off coupon. My job was to mail it to 350k households. While the limited time offer was supposed to be $49.00, the printer screwed up and I failed to catch the error. I mailed 350k coupons offering the product for $4.99. I thought for sure I’d lose my job because my company would be forced to honor the steep discount. Remarkably, the whole thing was largely a non-issue. The vast majority of recipients either threw the offer away, or didn’t pay enough attention to it. Others consciously decided they didn’t want the product no matter how cheap it was. I was shocked that my mistake of offering something more than 90% off had such little effect. Clearly the product was not the darling we hoped it to be.

Everyone loves a good deal, and I’m not anti-sales. Properly deploying occasional discounts can be worthwhile. But way too many marketers have gotten lazy and choose the path of least resistance, which is to sell more stuff cheaper, and run more promotions more often. Just like with real drug addicts, the solution never involves consuming even more drugs with increased frequency. A proper rehabilitation plan is required.

Too many marketers have gotten lazy and choose the path of least resistance, which is to sell more stuff cheaper, and run more promotions more often

The most cult-like brands on the planet, brands who are engaging customers the best, are usually sold at full price (and oftentimes at premium price points). These brand leaders understand that marketing is so much more than shouting or bribing. Enlightened brand leaders avoid participating in the race to the bottom where whomever has the lowest price wins. Cult brand leaders know there are better (and far more fulfilling) ways to compete.

If your brand is doing more markdowning than marketing, be honest and humble enough to admit you have a problem. Overcoming denial is the first step of the healing process. Then have enough courage to say “enough is enough” and seek professional guidance to help you begin your path to recovery.

Further Reading
The CULT of Customer Experience
FIX: A new prescription to cure disengaged customers, prospects or staff
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