December 03, 2014 09:30 ET

Focusing on Discounting Can Dilute Brand Equity, Warns Lipman

Despite the Mounting Pressure to Discount in Order to Make a Sale, Marketers Must Beware of Cheapening Their Brand Permanently in The eyes of the Consumer, CBX Executive Writes

NEW YORK, NY--(Marketwired - Dec 3, 2014) - Although deep discounting can give retailers a short-term edge over their rivals, from a brand equity standpoint, relying solely on lower prices can have unforeseen consequences, writes Gregg Lipman, Managing Partner at brand agency and retail design consultancy CBX, in a guest commentary that appeared November 25 in the Business section of the Huffington Post.

In the column, titled, "The Race to Zero: Time to Rethink 'Discount' Mentality," Lipman contends that allowing a brand to become subject to "discount creep" will ultimately cheapen it by training customers to focus exclusively on price rather than the brand's intrinsic value. "The biggest risk to relying on discounts to drive sales is that it becomes the definitive narrative in your brand story," warns the veteran brand marketer. "When selling on price, you're not selling on a product's unique attributes. Worse still, you're not selling on emotional benefit."

Lipman points out that the power of branding resides in the way it uses the psychology of images, words, colors, patterns and fonts to create a value that transcends rational calculations. "Does the product add experience, create a memory, spark a wonderful feeling, enhance a moment, inspire personal growth?" he asks. "Engaging in a discount-focused strategy neglects the power of brand and is likely destined to fail over time."

In a retail environment increasingly characterized by competition on price alone, it is easy to forget that a sales strategy should not rely exclusively on discounts and concessions that ultimately devalue a brand. Rather, Lipman argues, the challenge is to create more demand for the product. The executive evokes the message of legendary advertising exec David Ogilvy, who declared in 1986: "any damn fool can put on a deal, but it takes genius, faith and perseverance to create a brand."

And in fact, Lipman goes on, consumers look for more from brands than just a bargain. He likens the relationship of consumer and brand to friendship, describing it as engagement on a deep, personal level. Like a good friend, a brand can play an active role in one's life.

Lipman concedes that luxury brands have an easier path in defending and justifying their price position. He points to a campaign by natural mineral water brand Perrier to refresh its identity and attract new customers -- without resorting to discounts or adopting a new, ultra hip image. Under the campaign, the company teamed up with contemporary artists on limited-edition series of Perrier bottles. "By focusing on elevating their brand through smart packaging, positive associations and high impact content, Perrier has experienced a resurgence, selling 1 billion units in 2013 in over 140 countries," he notes.

That kind of approach is not, however, restricted to high-end brands. And despite the pressure on them to produce impressive short-term financial results, Lipman urges brand marketers to resist selling out. "For a long-term strategy, consider striving for the things that create brand value," he concludes, "Otherwise it becomes a race to zero."

The full article is available at:

About CBX
CBX specializes in creative marketing services including: branding, retail design, packaging and promotional programming. The company, with its current staff of more than 160 employees, was founded in 2003 and has a client base that includes: Dr Pepper Snapple Group, General Mills, Kimberly-Clark, Scotts Miracle-Gro, A&P, Pathmark, Saks Fifth Avenue, Lord & Taylor, Shinsegae, Walgreens and Wawa. In addition to its New York City headquarters, CBX has offices in Minneapolis and San Francisco. CBX was named a "Design Firm of the Year" in Display & Design Ideas magazine's 2013 Portfolio Awards.