Paul Godwin, head of insights at the IPM, said: “Discounting has been seen as a cheap and dirty way of getting volume out of the door of the factory and the retailer. But the result is that promotional activity has changed from being a means to generate interest in brands to something that actively discourages brand purchase, unless there’s a deal.”
While supermarkets can afford regular bulk discounts, trying to follow suit has the potential to damage your brand. If consumers know your products will regularly be on offer, why would they pay full price?
Davin Nugent, MD of cider brand Kopparberg’s UK division recently told Real Business: “Promotions erode the value of the brand. If it’s on offer in every Tesco Express for a pound, why would you spend £4 in a bar? It undermines it.”
Gideon Lask, CEO and founder of eCommerce firm Buyapowa, said: “These figures from the IPM show that UK retailers are still far too reliant on heavy discounting strategies, despite mounting evidence they don’t achieve long term results.”
“Once upon a time a decent discount paid for itself in exposure but, with so much discounting going on, any real cut-through now requires margin-obliterating cuts of 80% or more.
“Even then, it’ll simply attract deal-hunters with no loyalty to your brand and no incentive to shop with you again. Unless you’ve got money to burn, discounting is dumb.”