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Discounts or Price reduction which one is better for long term goals of a brand

Created by : Kiran Kumar Koti, Merchandising Operations Manager, Zero Stock Retail Pvt. Ltd  | 09 01 2009 13:49:23 +0000
Industry : Retail Chain/LogisticsFunctional Area : Branding(Sales & Marketing)
Keywords : product pricing price reduction price correction dicounts
Activity:  360 views;  last activity : 07 06 2010 20:18:09 +0000

Accroding ot a recent article on imint most of the Premium apparel brands are revising their pricing, positioning and production strategies to ensure more sales, even if it means selling at lower prices that don’t quite belong on a high-end tag.

DO you think this is best idea to reduce the pricing insted of discounting

 

  
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Discounting Vs Price Reduction
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For high end branded products, it is better to offer occasional discounts rather than reduce the prices permanently. The reason is that these branded products are not competing on price. In other words, quality is the order winner in this case, price is merely a qualifier.  In the Indian context, discount has a special attraction to the customer. However, in order to maintain profitability, the company must reduce its internal costs so that profitability is not eroded even at discounted selling prices.
By Dr. Siddharth Varma, Professor, International Management Institute  09 02 2009 06:06:30 +0000
 
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Both price reduction and discounting effect the brand equity. The only difference lies in the execution of the plan. Discounting on a regular priced product causes impulse and is seen as increase in offtakes. Discounting acts as a catalyst in prompting a shopper to buy , however regular discounting gets the brand labeled as a discounted brand. Eventually after some time the offtakes fall. Price reduction on the other hand is viewed as a dip in the positioning of the brand. Every brand comes with a price and price is viewed as a status for the brand. Sudden dip in price is viewed as a fall from its earlier position. However the tric is , if the price dip is done and the additional benefit is passed to the customer and is communicated well the equity of the brand doesn't take a dip. It on the other hand helps counter competition. 

Discounts are basically for short term benefits and Price dips are done with long term in mind.
By joy chatterjee, National Key Accounts and Trade Marketing Manager, Artsana India Pvt Ltd  09 24 2009 07:46:58 +0000
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Discounting is suggestable.


By malladi madhukumar, AGM -MKTG, Andhra Cements Ltd  | 12 27 2009 03:48:52 +0000
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I am in total agreement with Dr. Siddharth Verma. Occassional discounts or promos would suffice!!
By Alka Thakur, Technical Support Manager, Vendio Services and a freelance German Translator  | 09 24 2009 10:06:04 +0000
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yeah i agree for price reduction, as in this recession no one would like to wait for the discounts and if discounts are increased, simelteneously some qty targets are also given to the retailers
By yadavilli srinivas, Asst. Manager/Manager -(NonTechnical), VE COMMERCIAL VEHICLES LTD  | 09 23 2009 15:50:23 +0000
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price reduction is better ,it can be planned as per budget ,discounts means wrong selection of product line or wrong pricing strategy,always gives a negative image of brand.
By jyoti sethi, visiting faculty, FDDI/NIFD/IRS  | 09 23 2009 11:12:41 +0000
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Price reduction might back fire in premium brands as exclusivity of price is what makes it premium. If price is reduced it might send in wrong signals that the brand has been degraded & the market segment might flee. For mass brands discounting will be good choice ..... as Indian  middle class customers are now used to discounting & it has become a major deciding factor.
By santosh kumar, Marketing Manager, AUTOMOBILE  | 09 07 2009 12:05:55 +0000
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I would go for Discount. For long term, the organisation needs recognition which is very easy by giving discount on products which will attract more customers,.............
By Ramdas Pawar, Sales/BD Manager, Flex  | 09 01 2009 14:22:30 +0000
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Both are harmful for the brand in the long run. But i am slighlty inclined towards a price reduction as that not only has a positive impact on the brand but also has the option of going back to the original price after the promo period.

Whereas a discount has a negative impact on the brand and contributes to a cheaper image.

Where both get affected is the impact on the products bottom line if resorted to frequently. Brands like Pierre Cardin and Colour Plus closer home have lost their equity because of the frequent sales and discounts offered.  A once-in-a-year price reduction or discount offer will retain the brands equity and make the event sought after but unfortunately retailers are increasingly resorting to this kind of marketing to liquidate their ageing stocks with a short term perspective little realising the damage done to the brand in the long term.
By Jaygopal Raghavan, Marketing Manager, Landmark Group  | 09 24 2009 09:25:28 +0000
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Somehow I feel that it’s better to offer discounts then reduce the prices. In the current market when the buying power of the consumers is down when compared to year ago or so its better to offer a discount. The reason being that this situation is not going to be permanent the market will someday turn around & return to a situation where people are ready to spend more. If a company offers discounts / price reduction in the current market it will definitely help them to increase their numbers.

But when the markets rebound & people are ready to pay a higher price it may be a bit difficult to justify a increase in price, whereas in case of discounts a company can look at the market situation & reduce the % of discount offered from time to time as the market shows signs of recovery & over a period of time scrap the discount.

But it could be much difficult to go back to the customer with an increase in price when you have competetion offering a lower price. This may be possible with FMCG products with a bit tweaking of the weight i.e. where a packet of 100 gm of biscuits is reduced to Rs. 10/- from the initial price of Rs. 12/- but later to increase the price you keep the MRP@ Rs. 10/- but the weight comes down to say a 85 or 90 gm
By Girish M Nair, Deputy Sales Manager - Route Development, DSV Air & Sea Pvt Ltd.  | 09 07 2009 16:53:28 +0000
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When Indian ladies go for shoping and the artcles of reductioned  price are shown ,they ask for discount again .
By SB DIKSHIT, STATE QUALITY MONITOR, U.P.R.R.D.A  | 09 01 2009 14:11:16 +0000
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