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Counselor Commentary: Break The Discounting Habit

There’s a bit of an epidemic going around businesses today. It’s a sickness based on companies’ tendencies toward sales and coupons and, well, discounts. And, it is especially pronounced at retail this holiday season. Practically every single store or website is luring consumers with promises of deep discounts – 50% off here or buy-one-get-one-free offers there. In fact, retailers are offering more coupons than ever before – an increase of 15% over last year’s record-breaking holiday season for discounting.

It’s almost like a real price simply doesn’t mean anything anymore. Two weeks ago, I walked into a Best Buy to purchase a laptop with no coupon in hand and no promotion top of mind that would take money off the list price. The salesperson helping me was friendly and was easily able to provide answers to my questions. After agreeing on an item, being ok with the price as it was marked, and walking to the register to pay, I was momentarily caught off guard when the salesperson said to me: “This is a gift, right? We can usually take some money off of the price for gifts.”

Huh? He knew it was a gift because we had talked about it during the sales process. A manager quickly came over to the register, the salesperson whispered something to him, and the manager said, “20%.” They took 20% off the posted price of the laptop right then and there without the customer even asking or inquiring about a possible promotion. Again, what’s the real price of anything anymore? Stores – and, by the way, business-to-business operations too – are devaluing everything they sell. Retail analysts say they’re doing it as a form of advertising – the Groupon model, if you will.

"Searching for deals is a part of the American shopper's DNA, and smart promotions from retailers have a better ROI than traditional forms of advertising," says Cotter Cunningham, CEO and founder of Austin-based RetailMeNot, a website that provides consumers with deals and coupons to various retail stores. "This type of advertising efficiently builds brand awareness; it drives traffic online and in-store, and it ultimately leads to increased sales."

Unfortunately, it also leads to a devaluing of products to the point that consumers will never pay full price. Now is not the time to give in to the discounting trend. The economy and job market have bounced back to the point that the Federal Reserve is about to raise interest rates for the first time in nearly 10 years. This kind of market is ripe more for price increases than rampant discounting, which only serves to condition customers to think they can always get a lower price from you.

Don’t give in to the discounting trend. The potential short-term gain is sure to hamper a company’s long-term goals.