The Two Sides of the Deals & Discounts Story

Deals and discounts are a big draw for customers, but at what expense to retailers?

Kohl's Department Store

A while back I wrote The Double Edged Sword of Discounting in which I warned brand marketers and small business owners about the danger of relying on discounting to attract customers. In short, deals and discounts will breathe life into your short term sales, but can lead to detrimental long term effects.

My perspective on discounting, though, is continually challenged by the consumer in me. You see, I have this whole Dr. Jekyll & Mr. Hyde thing going on. As a marketer, I am a big proponent of adding value (as opposed to discounting). But as a consumer, I am always on the lookout for coupons and deals.

No one brings out the Mr. Hyde “Deal Hunter” in me quite like Kohl’s department stores. To say the retailer is highly promotional is putting it mildly:

• New charge card customers are offered 20% off entire purchase the day they open an account.
• Kohl’s offers extra discounts to charge card holders ranging from an extra 15% – 30% off all regular, sale, and clearance merchandise.
• Regularly send “$10 off everything” coupons.
• Frequently offer $10 in Kohl’s Cash for every $50 spent.

This discounting strategy has helped Kohl’s cope better in the recessionary environment than many of their competitors (see below)

Source: NRF 2010 Top 100 Retailers ¹

Kohl’s success, however, has come with a steep price.

As a consumer, I love the deals. But as a marketer, I am concerned for the retailer’s future. Why? Kohl’s has essentially made discounting and price promotions their sole marketing strategy, which, as history shows us, is neither smart nor sustainable. The retailer has trained their customers to shop on price….and that’s never a good thing.

¹ 2010 Top 100 Retailers