eMarketer wonders if a brand is negatively impacted by offering discounts on price.
Their research flies in the face of what we preach. Market leaders typically offer a premium product and it is always tempting to lower prices to quickly gain some market share. But the minute you discount the product, you discount the value it brings to customers. Whether literal or implied, your customers will assume the higher cost they used to pay was inflated. And while part of a premium product's price tag is profit margin, it also takes into account the value the product brings to customers.
From fewer repairs and better warranties to the years of knowledge its service and support team leverages on your business, you usually buy more than a logo when you purchase the premium brand—especially in business to business. Pricing yourself at a discount is usually a losing battle.
Cadillac played this truth to their advantage when it unveiled Cadillac 16 . If this ultra-luxury concept car goes into production, it will come with a ton of chrome, 1,000-horsepower and a V-16 engine. It will also come with a minimum $250,000 price tag. 16 helps reinforce Cadillac's position as THE leading luxury automobile manufacturer.
Cadillac and other luxury brands face bigger issues right now than premium brands. Between the market and the war, customers have put most purchase on hold. This puts a Rolex watch down to the bottom of a very long list. Rolex is developing a more quality focused approach to defend their price tag. By emphasizing that it takes a year to build the watch, they hope to show customers that a Rolex, a real Rolex, is well built and it will last. A Rolex is worth the investment.
Business to business purchases are typically considered purchases—an average of 6 people are involved in the decision to buy. As a result, business to business companies have a tough job defending their premium price. But eMarketer's research is right. There are exceptions to the "never lower your price" rule.
Hobart Corporation offers a creative example of how to discount the brand and strengthen it in the process This leading food equipment manufacturer is offering zero percent financing. The company is acknowledging the economy and the issues its causing its customers. Here is a limited time offer to help its customers out. This shows Hobart works with its customers to help them through this challenging period. It is simply brilliant and shows us we should never be afraid to experiment and try something new even when the rules of marketing might seem set in stone.