Are Excessive Couponing & Discounts Ruining Customer Experience?

Recessionary addiction to sales and couponing has business by the throat. Excessive discounting dilutes brand value, diverts attention from customer experience and gives the masses too much control in all the wrong ways. Ron Johnson’s limp out of the gate with JCPenney’s new pricing strategy reveals just how hard it is to loosen the digits of the consumer’s iron grip. More brands, however, need to follow suit and shift the paradigm away from deals to a premium customer experience.

Before Reading ahead, take a couple minutes and be entertained with this video about Extreme Couponing:
America’s new obsession with price is eroding business.
The recession hasn’t stopped consumers from consuming. Like a drug addiction, they’ve just found a cheaper and dirtier way to do it: over-the-top discounting and Extreme Couponing. From a consumer’s standpoint – branding, customer experience, product uniqueness and price are the four real pillars of differentiation. Extreme Couponing may be entertaining at a glance, but the concepts behind it are eroding businesses from the bottom up. Obsession with the best deal in town is forcing brands to compete on the one thing they’re not supposed to compete on price.

Competing on price and competing on brand aren’t mutually exclusive, but it’s close.
According to The National Retail Federation, sales are expected to rise less than they rose in 2010 and as brick and mortar stores are crumbling, brands are going to continue to look for ways to make a quick buck. Our nation’s appetite for coupons and sales seems easily satiable. The problem is that when consumers stop caring about customer experience, brands stop concentrating on it. When brands don’t give a lick about customer experience, customers don’t form any brand loyalty and all of a sudden businesses are subject to fickle customers driven only by price comparison.

Keeping customers means concentrating on core values and delivering on them through consistent customer experience.
Simon Sinek’s book Start With Why explains that businesses should start from a core idea that resonates with consumers. Everything thereafter, product offering, service, etc. should hang from this idea. Apple, Target, Amazon, etc. have this as their core strength. The relationship between people and brands can mimic relationships between people in that way. Identification in common values, trust and consistency in experience will keep consumers coming back. Sadly, a recent study of 200 large companies by The Tempkin Group says that compelling brand values was one of the weakest competencies surveyed. (Check out Simon Sinek’s Ted Talks on Starting with the Why:

Despite disappointing Q1 results, JCPenney has the right idea. Just give it time.
JCPenney fancies itself NOT one of those companies. It has recently made a dramatic attempt to concentrate on brand value over sales promotions. The brand idea is Fair and Square and if you are unfamiliar with JCPenney’s new pricing strategy, here’s the nitty-gritty:

  1. Eliminate excessive sales and stay consistent all year with everyday low prices (about a 40% discount across all items.)
  2. Every day pricing will be broken into three tiers: (1) Every Day prices, (2) Month Long Value (theme sales such as back-to-school related products in August), and (3) Best Prices (clearance)
  3. Prices will be rounded to the nearest dollar (instead of $39.99, the price would be $40)

The pricing is a piece of a larger strategy that includes a brand overhaul, offering mix-up and customer experience redesign. Ron Johnson is credited with pioneering major parts of both Apple’s and Target’s pricing strategy and customer experience. Now JCPenney’s new CEO, he’s attempting to pull America away from its obsession with rock-bottom prices and bargain hunting. He’s making a major bet that the idea of Fair and Square and simplicity in sales structure will resonate with customers. The initial results have been scary. Revenue is way down since the switch and investors are squawking, but it’s the jagged little pill consumers need. Ron be like Steve Jobs and tell the consumers what they want. Investor panic over initial results is unfounded and premature. If more brands were willing to make a bold pivot like JCPenney, we’d have stronger businesses that resonate with consumers, loyal customers and ultimately a stronger economy.

Pat McClure WMP Customer Experience (CX), Seattle WA. We’re working every day to close the gap between brand promise and business execution through the practice of customer experience. Through CX, WMP can help build a loyal, happy and beneficial relationship with your customers. 

Phone: 312-602-4000
222 W. Adams
Chicago, IL 60606
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