Companies invest in building strong brands not because it’s a fun thing to do (although–professional secret–it is!). They do it because stronger brands pay off for them in terms of more revenue, bigger margins, higher customer loyalty, better talent acquisition and ultimately, greater shareholder value. Yet on a regular basis many companies do something that hurts their brand value now and erodes it significantly over the long term–they run price promotions.
After investing millions to build their brands, why do companies turn around and do something that damages those same assets? The reasons for price promotions are multiple and overlapping; to drive short-term sales, because the competition is doing it, retailers expect it, it’s a holiday season and/or because customers are searching out deals. These all sound logical and sales and marketing people can easily make the case for them to upper management. However, the visible short-term sales results lead managers to overlook the long-term negative impact to the brand’s value and ultimately, the financial returns to the firm.
So how do price promotions hurt the brand?
Read more of Mark’s Fast Company blog here.