Price cutting being the crack cocaine of business

Discounting is popular because the applause arrives before the bill.

Cut the price on Monday and sales may jump by Friday. The margin damage, trained customer expectations and cheaper product experience take their time. By then the promotion has a proud slide in the quarterly review and the consequences belong to somebody else.

A sofa retailer that is always on sale teaches us the ticket price is fiction. A software company offering 40% off whenever somebody clicks cancel teaches loyal customers to perform a monthly hostage negotiation. A restaurant filling tables with vouchers may discover diners remember the voucher more fondly than dinner.

Then the loop bites. Lower margin means less room for service, ingredients, support or invention. The weakened offer needs another discount to move. What began as a tactic becomes a personality. Price cuts are not forbidden. Clear old stock. Reward an annual commitment. Reduce the risk of first trial. Help a genuinely excluded customer. But name the behaviour the discount is meant to create, and measure what happens after the price returns.

Volume during the offer is the easy number. Full-price repurchase is the adult one.

When a business cannot explain why today’s customer will pay more tomorrow, the promotion is teaching customers how not to buy.

Behavioural principles

Behavioural ideas at play in this post

Short, plain-English explanations of the principles behind this post, with links to related books and examples in the archive.