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Will Brands Win with Price Alone in a Crisis?

Ping! A notification in one of my messenger group chats caught my attention. A friend was asking if there were any ‘rona sales where she could find discounted Chanel perfume. Another friend replied saying Chanel never goes on sale, that’s how they keep it so luxurious.

This exchange got me thinking about brands, their image and their relationship with customers, especially in a time of crisis. Chanel is an institution in the luxury sector, having built a reputation as an industry leader over decades. It has meticulously built an empire based on high-end craftsmanship and exclusivity – two things that come at a premium. Furthermore, they’ve courted a core audience that sees value in these two things and is willing to pay that premium. Discounting is unnecessary and would devalue their products.

But what about brands outside the luxury sector? And what about brands that operate specifically in the budget space? Should they be considering further discounts to entice new or existing customers to spend their hard earned dollars (or government stimulus)?

The Australian economy has been hit hard. Spending from mid-March to the end of April took a significant drop, according to this real time spend tracker developed by AlphaBeta and illion. Further research by illion shows that Australians have responded by switching to discounted brands such as Aldi and Costco to make their money go further.

The ABS estimates almost one million Australians have lost their jobs since strict social distancing measures were introduced. This loss of income is forcing Australians to be more budget-conscious and where they may have been loyal to a particular brand pre-pandemic, they are now seeking cheaper alternatives.

This unloyal brand swapping behaviour means it’s more important than ever for brands to act on their missions and communicate their values. Show customers the value of your product and service, support them during this time of uncertainty and let them know you care – about their wellbeing not their wallets. Give them more to engage with than just cheap prices.

While the knee-jerk reaction might be to compete on price, unless low prices are part of your guarantee to customers, it’s not the way forward. Imagine a 50% off sale on Chanel? If you’re not a brand that plays in the discount space and you’re suddenly discounting prices, it’s strange and unsettling. Whilst you may attract new value-minded customers, they will be hard to retain long-term when you try to increase the price of your product.

On top of that, it’s also gambling with your brand’s image. Discounting during times of economic downturn can lead to a negative long-term perception of your brand or product and can lead to loss of market share. According to Harvard Business Review, when customers part ways with their hard earned cash they want to get something that meets or exceeds their perceived value. If you discount your product, people start to question its original value.

My inbox has been pummelled with EDM after EDM promoting sales, with urgent cries of ‘last chance, sale ends midnight’ only to receive an email the next day saying the sale is extended. And an email the following week saying there is a new sale. It screams of desperation and pushing profits over customer wellbeing.

Now, some may argue that these brands are showing care for their customers who may be struggling financially by discounting items. That may be true in some cases. But when I’m notified about 20% off coats when we’re encouraged not to be going outside, it feels like a sales push. If it was 20% off basics you can wear at home or to the office I might have been more interested. If it was partnered with styling tips on how to wear one item five different ways, it would have caught my attention. Inspiring your customers with ways to make their wardrobe stretch rather than pushing them to buy unnecessary items shows a real understanding of their situation and care for their wellbeing.

So before your brand starts slashing prices in the hope of enticing customers in, ask yourself does this align with your brand values?

Yes, your brand may lose some customers seeking the cheapest prices. The research shows that. But you may lose even more customers if you push endless sales messages on them and neglect to live up to your brand values – the ones that attracted customers to you in the first instance. This is a time to show customers that you can deliver on your promise and show empathy for them. Brands that do this successfully will emerge the real winners.

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