A Tale of Two Retail Strategies
Why brands should be focusing on the long game in 2020
There’s no need to name names.
If I reference a retail brand that has focused on discounting as its primary digital marketing strategy over the past several years, there will surely be a few big brand names that spring to your mind.
You know the ones. Your email inbox almost certainly contains several emails from at least one of these retail brands. “40% off!” “Buy One, Get One free!” “Sale: Up to 70% off!”. This type of “spammy” copy has become the hallmark of some retail brands, those which have chosen a very clear and obvious direction. Brand voice and messaging have been sacrificed upon the altar of short-term boosts in digital marketing performance.
Falling revenues, stiff competition, and aging customer bases created a perfect storm for one of the most flawed marketing practices in living memory – the deep discounting clickbait race to the bottom.
The big question is: how has it worked out?
To answer this all-important question, let’s look at the diverging paths of two retail brands – one, an established brand with deep roots in communities all across North America; the other, a digital retail upstart. To keep things simple, I’ll call these two brands “Retailer A” and “Retailer B”.
Already struggling to a certain extent as the digital transformation took hold, Retailer A needed immediate sales. In the name of avoiding bankruptcies and staff redundancies, Retailer A opted for a marketing strategy based on discount offers and short-term revenue gains at all costs to keep itself afloat. And they leaned into that strategy, month after month, quarter after quarter, year after year.
In the short term, this strategy produced results. Who doesn’t like a nice deep discount, after all? Long term, however, Retailer A discovered that deep discounting was an unsustainable marketing strategy. Most importantly, its margins got hit. Why would anyone ever pay full price for anything in their store? As it turns out, no one ever would. And so… its share price over the ensuing half decade or so…
Retailer B, meanwhile, experienced a similar decay in marketing performance at around the same time as Retailer A, and experimented with discount-based marketing for a brief period. However, Retailer B saw what Retailer A did not – namely, that discount-based marketing was a road to nowhere.
As Retailer B’s stock plummeted, in 2016 the brand took the difficult decision to stop participating in the deep discounting race to the bottom. It doubled down on its brand messaging with a strategy built upon a solid foundation of long-term brand value and improved consumer experience – with a little help from AI-Powered Copywriting, of course…
Comparing the stock price of Retailer A and Retailer B (January 2016 – December 2019)
The lesson here is a simple but important one. A marketing strategy built on discounting and more discounting and more discounting may offer short-term retail gains, but over time, it amounts to little more than the devaluation of your brand and a customer base that is completely unwilling to pay full price for anything you sell.
A marketing strategy built on a more robust foundation of effective brand messaging and a consumer-focused value proposition, on the other hand, allows retailers to maintain brand voice, brand value, and, most importantly of all, a positive perception in the minds of consumers.
The path your retail brand will take is yours to choose. Hopefully, you’ll pick the right one.
Written by Parry Malm, Phrasee CEO and co-founder.