The below was composed by a former coworker, Elton Graham (though we worked in different departments) of mine while working for James Perse. I truly feel he's hit the nail on the head with the below originally shared via LinkedIn.
August 11th, 2016 -
When you are a brand conventional wisdom says to never focus on price. Instead, talk about your brand’s benefits. Highlight your unique selling points. Show your product features and all the finer details that make you better than the competition. Prove your brand’s worth. Don’t start out introducing yourself to consumers by telling them how much they will have to pay for your product. This will only distract them. Talking about price is only for nameless commodities, which you are definitely not.
Think here. How are you different than all the discounters, volume outlets, flash sale sites and the mightiest of them all; Amazon? Answer: as all of these places sell more and more products, it’s never about how good the products they offer are. It’s only ever about how amazingly fast their service is, how gigantic their selection seems and how everything is offered at incredibly low, low prices.
This has never been more obvious than today, as the pricing wars online continue to heat up among mass retailers. Look at the battle between two retail behemoths, Walmart and Amazon. In the latest installment in this long saga, Walmart acquired Jet.com. Here, Walmart’s motive may be more about learning from Jet’s pricing algorithm technologies and how they redesigned the discount online shopping experience than its actual business. Walmart knows it has to compete with Amazon on price. It has been well known how Amazon uses technology to give itself what seems like an insurmountable advantage in the marketplace. They have been using it for years now. It gives them the ability to do things like intelligently adjust millions and millions of online prices every hour based on real-time demand. How can a company who isn't Walmart compete against this? Answer: be a brand.
But to be a brand with a product you need to be different. You need to think different. Think of the holy grail of product brands; Apple. More often than not, the lesson here is you need to rise above the pricing fray. Talking price is only for the lazy and the somewhat desperate marketer that shouts about giving deals and slashing prices as a last resort. It's the only way they can garner attention. Do this and in the long run your brand and business may be in trouble. For once you start discounting, your brand can become trapped in a downward spiral and often there’s no way back up.
“But sales and discounts work. We have to use them!”
Sure, offering sales and discounts will give your business a short-term revenue boost. It can definitely solve some problems like being able to quickly offload excessive inventory. But, in the end, you’ll likely train your customers to never pay full price again. Worse, your existing, loyal customers will start to doubt their past full-priced purchases with you. They’ll start to wonder if they were ripped off before. They’ll start to expect lower prices going forward. They’ll even hold out and wait to make their next purchase until you announce your next massive discount sale. Fail.
Don’t be trapped. Once you begin offering discounts, think long and hard about how difficult it will be for you to stave them off. Can your business support the lower margins? Can you still make a good enough profit? Think of well known case studies like that of JC Penny’s, who failed when they tried to break their reliance on discounts. Think about so much of the premium clothing brands who once easily sold higher priced items, but with their over reliance of flash sales, friends and family discounts and using off-priced outlets find themselves now struggling to attract any new customers willing to buy their new, in-season full-priced items. These brands are struggling.
This is obvious today in the department stores that many of these clothing brands rely on. Here, these well-established chains are choosing to close numbers of their main staple, full-priced stores. In their place, they are increasingly opening up more and more off-price outlets. Think here of stores such as Nordstrom Rack, Saks Off Fifth and Last Call by Neiman Marcus.
In this sort of environment, there’s a lot of truth to the adage, that when someone buys a brand that is priced at a deal or steep discount, they’ll never feel any better about it than the day that they bought it. It’s as if they’ve stolen it. Yet, as each day passes, they’ll feel less and less strongly about it. Subconsciously, the branded product has lost its allure. But, as the saying continues, when a consumer buys a brand at its set price, extolling its worth, the only time they’ll feel bad about it is the day they had to shell out the dough to buy it. Yet, everyday afterwards they’ll feel better and better about their purchase choice as their appreciation for what the brand and product represents grows the more they use it.
Given all of the above, my past advice to companies who want to be a brand has often been: don’t ever count on discounts establishing your space in the marketplace. In fact, do the opposite. Never make low price one of your main points of discussion. Don’t communicate it. Don’t supply them. Don’t do it. Don’t do it if you want to be a strong brand. Don’t do it if you want people to really keep their focus on all the other reasons your brand is awesome and empowers them to kick ass.
This pricing strategy has worked extremely well at brands where I’ve be lucky enough to lead talented teams establishing their businesses online (e.g. James Perse and Nasty Gal).
Yet, there are times when this strategy is simply, dead wrong. I’ve been wrong. As the market continues to shift, most of you will continue to be wrong.
It is the wise businessperson who understands that everything (and I mean everything) depends on your business context and your consumer’s frame of reference. Obviously, this includes how you handle pricing your product. Now, more than ever, is the time to really reconsider pricing and how it can launch and establish a strong brand online. There’s no better place to start looking than the market and who the market has now become. The future has arrived.
Enter the Millennial. These are guys and gals currently between the ages of 18–35. And, yes, yes, yes. I know. The term millennial is often used and abused. Millennial is a loaded term with lots of stereotypes and lots of over-hype. A lot of what’s been written out there is flat out derogatory. This includes criticism such as how millennials are only ego driven, how they’re self-absorbed and how they want lots of recognition and praise without necessarily doing the work to deserve it.
But, I want to give Millennials some very deserved credit, especially in retail. And, here it is: Millennials are changing the way new brands need to talk about price. They are helping companies make pricing a core message point in establishing their initial and on-going connections with their customers. In turn, these new brands are seizing new market opportunities to replace older, established brands. New brands online have become about price. They talk about it in a new way. It is their real advantage.
And, here’s why. Millennials want to be associated with brands that are inclusive. This means brands need to be inclusive about everything. They need to share how they conduct business, how and why they make their products and how they use marketing. This inclusiveness also pertains to how millennials want your brand to talk about and set its price. They need to be included.
Millennials want to feel involved. They want to understand that they are buying something that is not only awesome and talked about in an awesome way, but is awesome when it comes to how they established its price. They need to know that these brands are giving them a substantially fair price. Even better, they want to feel like they are intelligently getting a deal by simply doing business with your brand. This provides them with a feeling that they are smart for choosing you. And, by all means, millennials never, ever want to feel like they are stupid or they are paying an inflated, false price for something. In other words, they don’t want to feel like they are being lied to.
This need of inclusiveness and transparency goes along with the trend that increasingly millennials aren’t attracted to glossy big brand logos built by years of media spend. They aren’t into the allure of symbols or the “shields of cool” that many big business brands use their logos for. More and more millennials can’t be convinced by these brands' use of traditional media and messaging around mass cultural icons. Millennials simply have tuned out and gone online. They are now on Twitch or Youtube or Netflix or a social media app or... you fill in the blank. And, this is a big problem for traditional strong brands, whose pricing is well fixed and who have been traditionally successful in the premium marketplaces or luxury space.