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Thursday, Sep. 6, 2007 at 8:38 am

Sales, Discounts & Farts Get Results

By Jeffrey Eisenberg
September 6th, 2007

discounting stinksWant to clear inventory or goose sales this month? Announce yet another promotion.

Want to clear out a crowded elevator? Ask my friend John and he’ll explain how a poorly digested meal will do the trick.

You will get results! Even if both leave a stink.

Farting and clearances are both necessary and both have an appropriate place and time.

Kevin Hillstrom got me thinking about this issue again…

Bryan and I often rant against discounting dependence, and we’re not alone. In his Entrepreneur magazine column, my good friend Roy Williams has explained the time and place to balance relational and transactional customers in your advertising . Another good friend, Jim Novo, can explain why discounting fails with RFM modeling techniques. So it’s not a new concept, but one worth revisiting.

Kevin Hillstrom wrote about sales and discount promotions in a recent blog post, which includes a spreadsheet on the matter:

…When executed properly, management loves a sale — profit could increase, sales likely increase, inventory is moved.

But then the sale ends. And a cohort of customers purchased because they got a “deal”. These customers, in many instances, are less likely to repurchase, and if they want to repurchase, they want to get a “deal”!

Couple that with a management team that is forced to grow top line sales. Sure, bloggers, management consultants and marketing experts will tell management to “sell great products”, and everything will take care of itself. That’s a theoretical argument. Management has to move what sits on the shelves today, regardless whether it is great or not.

So, management adds additional sale periods. Management mixes promotions, free shipping, 20% off your order, 40% off selected merchandise. Sales grow! All is good!

Eventually, the mix of the customer file is irrevocably changed. A large chunk of the customer file loves sale merchandise. Even if you have great full-price merchandise, it will take a few years to acquire the kind of customer who loves full-price merchandise… read the entire post

The addiction to discounting (clearly related to the crackvertising addiction) seems to be so consuming that, despite it’s noxious effects, retailers simply can’t control the habit. Perhaps repetition can change that.

So, I ask you retailers who read this blog: does repeating this information help?

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Jeffrey Eisenberg, founder of FutureNow, is a professional marketing speaker and the co-author of New York Times and Wall Street Journal bestselling books Call to Action and Waiting For Your Cat to Bark. You can friend him on Facebook.

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