A tea merchant found that after a holiday promotion, order rates rose significantly. He became addicted to promotions, but after multiple discounts, he discovered that his tea only sold during promotions; at normal prices, no one bought it. Eventually, after calculating ROI, he realized he couldn't make money, so he cut the tea product line and gave away all inventory as gifts.
Now, during the year-end holidays: Double 11, Thanksgiving, Double 12, Christmas, New Year, Spring Festival... There are too many reasons for marketers to plan discount promotions, and countless clever discount strategies emerge.
However, some promotions make a brand soar, while others become brand suicide.
So, today's article first analyzes: When do discount promotions work best? How to do them without hurting the brand?
"Discount promotion" is the most common marketing tool, but it's a double-edged sword. Used wisely, it can instantly defeat competitors; used improperly, it can damage the brand itself.
However, "discount promotion" is also a necessary method for quick results and rewarding customers. So, this article focuses on three key questions you must understand when using "discount promotions":
- 1. Why do discount promotions often "self-harm"?
- 2. When do discount promotions work best?
- 3. How to reduce negative brand effects from discount promotions?
1. Why do discount promotions often "self-harm"?
To meet company KPIs, "discount promotions" often boost sales, but sometimes these situations occur, which most people are aware of:
- Frequent discount promotions become less effective at stimulating sales.
- After returning to normal prices, consumers stop buying.
Once this happens, it indicates a "side effect"—the side effect of a solution that worsens the original problem.
Each discount temporarily alleviates the symptom of "not selling," but because the root problem isn't solved, the problem worsens (after returning to original price, sales are worse than before). This is what we call "treating symptoms, not the root cause."
This is like a person who is very tired and uses stimulants to stay awake; after the effect wears off, they feel even more exhausted, and each subsequent use becomes less effective.
Why does this happen? Why does discount promotion, as a solution, work in the short term but have this "self-harm" side effect in the long run?
Any marketing plan that only includes external stimuli will face these two problems, just like any external stimulus solution (e.g., motivating employees solely with salary):
1. Stimulus adaptation problem—frequent discounts become less effective each time.
Just as the first use of a stimulant is most effective, repeated use diminishes its effect. This is called the "stimulus adaptation" problem—as the number of stimuli increases, our response to each stimulus decreases.
Discount promotions are the same: even if a user doesn't understand a product or want it, simply seeing "price below normal" can trigger a purchase due to the psychology of getting a bargain, giving them a "thrill" each time.
But as discounts become more frequent and widespread, the "thrill" from each discount gradually weakens or disappears.
At that point, we can say your consumers have developed "stimulus adaptation" to your discount information (we'll discuss how to mitigate this later).
2. Stimulus dependence problem—after returning to normal prices, consumers stop buying.
When you stop providing stimulants, a person's mental state immediately drops. This is the "stimulus dependence" problem—pure external stimuli don't change long-term attitudes, so once the external stimulus disappears, the short-term "boom effect" quickly fades.
There's a study:
Psychologists had two groups of subjects play a new building block game. The first group received $1 for each level completed (an external stimulus), while the second group received no reward.
After playing for a while, the psychologists announced the experiment was over, and they could do whatever they wanted.
The rewarded group immediately stopped playing and wandered around or read magazines to pass the time, while the unrewarded group mostly found the game fun and continued playing.
This is because people attribute their behavior. The rewarded group told themselves, "I play to earn money," so playing didn't change their attitude or make them love the game.
The unrewarded group, lacking that motive, were more likely to tell themselves, "I play because it's fun," thus genuinely changing their attitude.
So, pure external stimuli rarely change long-term attitudes—rewarding people to play a game doesn't make them love it; discounting to trigger bargain-hunting doesn't make people truly like the product.
Many have seen this little story:
An old man was annoyed by children playing football outside his door. No matter how he scolded them, it didn't work because they loved football. So he changed his approach: "I appreciate your playing. I'll give you each $2 every day you come." The children were delighted and played even harder.
After a while, the old man said, "I don't have much money left, so I can only give you $1 each." The children were a bit unhappy but still came.
Later, he said, "Sorry, I'm out of money, so I can't pay you anymore." The children were upset and stopped coming altogether.
Though just a story, it reveals the famous "Aronson effect": when external stimuli decrease, attitudes become more negative.
Similarly, after continuous, heavy discount promotions end and prices return to normal, consumers who regularly bought may stop buying.
But discount promotions can sometimes bring huge benefits to a brand.
For example, many paid games invite some players to try for free during beta testing—a form of discount promotion that often works well and attracts many users.
So, how can we use it to get sales results while reducing self-harm?
2. When do discount promotions work well?
Discount promotion is an external stimulus, unrelated to the product itself. This marketing tool cannot make consumers understand your product better, nor can it create purchase motivation (which is what you should focus on). The only thing it does is get people to try purchasing due to the "bargain-hunting psychology."
Therefore, many marketing problems should not be solved with discount promotions.
For example, if you see this product for the first time, what do you feel?
Isn't there no reason to buy a "72 Changes" umbrella?
In this case, the main marketing problem is "purchase motivation." I need to understand what the product is and why I should buy a 72-changes umbrella instead of a regular one (maybe it's a special feature inspired by Sun Wukong). Before solving these problems, a 50% discount during Double 11 won't significantly boost long-term sales.
So, if you're planning a big promotion, first accurately identify the key marketing problem you face, then determine if discount promotion can solve it.
Based on my past research and experience in health products, discount promotions work best when your marketing faces these situations:
1. Users have purchase motivation, but initial acceptance is difficult.
If your product meets this condition: initial promotion is difficult, but once users accept it, they continue to use and buy, then discount promotion often works.
Research shows that if your new product lowers costs for users without reducing quality (easily perceived), it's easier to promote. For example, a power bank with the same performance and appearance but 20% cheaper.
If your product keeps costs the same but increases quality, it's also easier to promote. For example, a phone at the same price but with a Snapdragon 810 instead of 600.
The hardest is when your product increases both quality and cost. For example, Shenzhou Zhuanche (a premium car-hailing service) is more expensive than taxis but offers much better service.
Such products are harder to promote because users can't easily compare (price up, quality up—the brain struggles to compare two variables simultaneously).
This creates a barrier to promotion—note this: requiring users to think and compare before deciding is a major marketing obstacle.
But if you temporarily lower the price of the premium service to taxi level through discounts, users can more easily convince themselves:
"Since the price is the same, why not sit more comfortably?"
Then, after users experience the benefits and get used to the product, you can raise the price back to normal. This is how Didi and other ride-hailing services initially promoted themselves—subsidizing drivers and users to build habits. Once it became a way of travel, they returned to rational operations. Now Didi's prices aren't very low, but some services are more comfortable (though some users may leave due to stimulus dependence, it won't have a huge impact).
In fact, many products meeting this condition often use this method in early promotion.
Examples: food, games, novel delicacies, etc.
Again, the prerequisites are:
- Initial acceptance is difficult. For example, a paid game that increases user experience and cost (they might not have budgeted for games).
- Once accepted, users tend to continue buying. For example, food, daily necessities, ride-hailing, social networks—once accepted, they're hard to give up.
- Users can get purchase motivation from the product itself. For example, a fun game—once you try it, you know. The product's use provides motivation. But health products don't give immediate feedback, so you need early marketing to create motivation; simple discounts should be used at appropriate times.
2. Users have purchase motivation, but there are psychological barriers to purchase.
If your product is already a "desire" in users' eyes (like a cheesecake they love), but they have psychological barriers (like thinking cheesecake is unhealthy), then discount promotion can help remove that barrier, reduce guilt, and stimulate long-term purchases.
For example, KFC and McDonald's in China run various promotions monthly—one time "10 chicken wings for 69 yuan," next time "family bucket half price." There's always a deal.
This is because many people love high-calorie foods like KFC, but the barrier is feeling it's unhealthy.
At this point, "discount promotion" as an external stimulus can reduce the guilt.
Research shows that people often need a special reason to consume hedonic products—like "it's my birthday, treat myself" or "it's on sale today, can't miss it." Promotions provide that special reason, stimulating consumption.
3. When you need to grab sales at a critical moment.
If you're at the decisive moment of a key battle, discount promotions can boost the final outcome.
For example, in the 1957 U.S. beer market war, Budweiser narrowly won, leading Schlitz by only 1.5 percentage points, but that 1.5 points made Budweiser the market leader in consumers' minds. It was never overtaken again, and decades later, its annual sales were over 20 times Schlitz's.
4. When this product is meant to sacrifice itself to drive traffic to other products.
For the team, self-sacrifice can also be used.
For example, when JD.com drastically cut book prices, it lost money but attracted massive traffic that boosted sales of other products.
Similarly, Three Squirrels used big discounts on pecans to attract customers and drive sales of other products.
In such cases, we can ignore effects like stimulus dependence and whether prices can recover, because the goal is to drive traffic. "Sacrifice the small to achieve the big." As long as it drives traffic, discount promotion is worth considering.
In summary, discount promotions require identifying effective timing; don't resort to them just because you can't think of a better marketing plan.
3. How to do it without hurting the brand?
Now we know when discount promotions work best, but we also need to know how to reduce brand damage.
As mentioned earlier: discount promotion is an external stimulus, which is prone to adaptation and dependence, making it hard to change long-term attitudes and even eroding consumers' inherent love for the product.
So, in the earlier psychological experiment, paying people to play the building block game made them think they played for money, and after payments stopped, they no longer liked the game.
If you must give them money (like a promotion), how can you reduce the damage to intrinsic motivation?
The most important method is: don't let them attribute the money to the reason for playing (change the attribution).
For example, tell players: "Thank you for enthusiastically supporting our event. Here's $1 each as a token of gratitude."
Then they won't put "earning money" into their motivation for playing, but rather into "enthusiastic support."
Similarly, to reduce promotion's harm to the brand, do this:
Attribute the low price discount to something else, not to the motivation for buying the product.
Here are some ways:
1. Special identity attribution: If consumers get a discount because of a special identity, it reduces harm to their purchase motivation.
For example, only members with over 5,000 points get discounts, only first-batch crowdfunding supporters get discounts, or only birthday celebrants get discounts.
Like Costco's everyday discounts and low prices, but only annual fee members enjoy them.
2. Special behavior attribution: If consumers get a discount because of a special behavior, it reduces harm to their purchase motivation.
For example, writing a product experience review earns a discount, passing three levels in a game earns a discount, or purchasing a certain amount of specified products earns a discount.
3. Special time attribution: If consumers get a discount because of a special time or event, it reduces harm to their purchase motivation.
For example: "We're discounting because China won the World Cup; we don't discount normally." (Or because of a third anniversary, Mother's Day, etc.)
(Note: The weaker the user perceives your discount as passive and temporary, the more they'll believe you're discounting to sell more. So strengthen passivity and temporariness.)
4. Special product attribution: If consumers get a discount because of special products, it reduces harm to their purchase motivation.
For example, high-end fashion items only discount on a few out-of-season styles.
5. Channel attribution: If consumers feel the discount is due to a third-party channel, not the brand's action, it reduces harm to their purchase motivation.
For example, if consumers feel a brand's clothes on Vipshop are cheap not because the brand lowered prices, but because Vipshop subsidized users, they'll still buy the brand at normal prices later.
This is why Tmall Double 11 emphasizes externally: "The reason it's so cheap is that Tmall is subsidizing; it's not the brand's doing" (even if that's not the case).
6. Altruistic attribution: If consumers think they're getting a deal not to be cheap but to help others, it reduces harm to their purchase motivation.
For example, some platforms give discounts to both you and a friend when you refer them.
In summary, when consumers understand discount promotions as passive, temporary actions by the company, or related to actions other than buying the product, the negative impact of external stimuli is reduced.
Price design is the top-level design of marketing.
Marketing Memo 📝
Companies need to meet KPIs, generate more business, or hope to gain market share through lower prices to reduce costs.
Discount promotion is often the most used method because it shows immediate results and is one of the easiest marketing tactics to think of and plan.
But we must face the potential dilemmas of discount strategies:
- Low-quality dilemma. Customers perceive the product as low quality.
- Fragile market share dilemma. Low prices can win market share but not customer loyalty. These customers will switch to even lower-priced companies.
- Shallow pockets dilemma. High-priced competitors have more staying power because they have more cash reserves.
- Price war dilemma. Competitors respond with even lower prices, triggering a price war.
Customers often question the motives behind price changes. They might guess: the product is being replaced, it's defective or selling poorly, the company is in financial trouble, prices will drop further, or quality has been reduced.
So, if we can achieve market returns through increased marketing efforts, product improvements, or innovative methods, we should absolutely not rely on discount promotions to solve marketing dilemmas, as they can have subtle side effects on brand building.
But when you must do necessary discount promotions, be sure to carefully manage the task scenario and timing, and use the various methods above to cleverly reduce harm (as analyzed in sections 2 and 3 above).
PS: Some promotional tools to consider (maybe better than direct price cuts):
Samples (via home delivery, mail, in-store pickup, attached to another product, or with ads), coupons, rebates, special price packs, frequent buyer programs, premiums (contests, sweepstakes, games), patronage rewards, free trials, product warranties, tie-in promotions, cross-promotions (using one brand to promote another non-competing brand), point-of-purchase displays and demonstrations...
Source: Sicheng Marketing (ID: sicheng7790)
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