Hello friends! Its Dave Nitzel again
thanks for joining me from Barmetrix and TheBarShift. I’m coming off the
road from a couple great days and several different coaching sessions and
there was a conversation that came up a couple different times around discounts
that I found to be super interesting so much so that even watched a video with a
panel of experts from our industry talking about the subject and I really
disagreed with a lot of what I heard and I’ve heard it before there’s there’s a
there’s an interesting some interesting narratives that happen in our industry
around discounts and what it does for the business so what I thought I would
do is impart some of what I have learned over the years from people much smarter
than me around how to think about this sort of thing and maybe help you in your
journey as to should I discount or should I not discount in my business so
my opinion on this is really formed when I was with a company called Office Depot
and I was tagged to be part of a future leadership group when I was in middle
management there and we got to spend one-on-one time with our CEO it was only
about 15 of us in the group and it was a really cool experience especially for a
very young manager at the time and I’ll never forget a couple things that he
told me and one of them was and he started with this it’s probably why it
sticks with me he said I’ve got every the answer to every question you’ll ever
get in business and I thought well isn’t that not the secret sauce this is
awesome and he said the answer is it depends
businesses are in a constant state of flux so what you’re doing today might
not be right tomorrow in effect the answer to the question depends on what
it is you’re trying to accomplish and that’s always stuck with me and I very
much operate under that mantra so let’s start with this we’re gonna take this
discount idea and Foursquare it for you in hopes that maybe it helps you get
your mind around whether you should or should not be doing discounts and you
business the first there are Foursquare so in the top left we’re going to put
doesn’t need to discount and doesn’t discount right this is the Holy Grail
this is where we all want to be this is a place where demand outpaces supply and
these companies are usually the biggest and baddest companies and they’ve dialed
into something special a good example might be Apple although even Apple still
does some forms of discounts but when they come out with their new products
demand is going to outpace supply and you’re simply not going to see discounts
in fact why would you something like Tiffany’s would fall into this box
I hear rest barred restaurant groups and owners fall into this box sometimes and
they talk about well we think that doing discounts diminishes our brand discounts
rarely diminish a brand what diminishes a brand is bad outcomes when we don’t
live up to our promise when we compromise the value proposition that’s
when we do brand damage not when we discount I will even go so far as to if
you really want to put your thinking cap on I’ll give you an example of companies
where demand outpaces supply and yet they still discount so I’ll try to
remember to give you an example of what that looks like at the end so I’m
putting this into a Foursquare but the truth is there’s thousands of squares on
this deal in the second Square in the top right what we’re going to put is
companies that don’t need to discount but do so an example of this might be I
recently met with Ritz Carlton and the Waldorf and those are those are two
absolutely iconic brands we would all agree and of course they they discount
for seasonality also within those groups they give free rooms as rewards programs
recently a dear friend of mine bought a Porsche one of the one of an iconic glue
brand and it was a new Porsche not an old one they didn’t need to discount it
off the floor and he got $20,000 off the ticket of the car he didn’t call me and
go hey man I just got a new Porsche I’m so excited
and guess what I think the brand’s in trouble I think I made a mistake because
they gave me $20,000 off the price of the car that’s not what he said
right he was more excited about the car not less and the brands not in trouble
because they discounted so I I if nothing else I wanted to spell the
notion that discounts does brand damage not a chance
wrong way to think about discounts that doesn’t mean you should it depends right
and the bottom right quartile we put businesses that should discount and do
usually businesses that should discount and do are ones that have more supply
than demand or they’re in some sort of launch mode we’ll stick with the car
theme here’s a couple I’ll give you would be like Kia and Hyundai in the US
market key and Hyundai came into the US market as entry-level automobiles but
they delivered on customer confidence and they delivered a higher quality
entry level vehicle as a result those customers were willing to grow with
Honda and Kia as they elevated their brand their customers went with them and
now they’re building sedans that compete with Mercedes and if you had said that
15 years ago no one would have believed you no one would have thought oh yeah
I’m gonna go buy a Hyundai instead of a Mercedes mm-hmm right but they delivered
on their value prop so sometimes people will say discounting damages of brands
such that you can’t elevate said brand not true again there’s some great
evidence and look in the automotive space people are very very loyal
there are powerhouse brands out there evidence by the discussion we had a
minute ago around Porsche but you can elevate your brand there’s people that
even say look if you do something for free then you can’t turn around and
charge for it who remembers when airline baggage was free and now you have to pay
for it but everyone’s still bringing baggage onto the airline so be careful
about what you believe in or sort of where you drive a stake because this
stuff is very very fluid now on the left side and I left quartile I’m gonna put
companies that should discount and don’t this is a little bit of my Oh
you ever been to a retail store that opened and say them all and they have
some really cool stuff in the store and there’s nobody in it and you decide to
go in and look around because you’re interested the product looks cool I did
this exact same thing happened to me about a couple months ago I was looking
for some athletic gear I wanted a soccer shirt because Atlanta United had just
won the MLS Cup I thought man I want a soccer search I’m looking for a cool
soccer shit and I go into the store that is packed
full of athletic gear and I’m the only one in the store which that was odd to
me I’m in a really busy mall I’m the only guy in the store and they have
great stuff so I’m going through the rack and I’m looking at these t-shirts
they’re dynamite I look at the price tag and I’m like holy oh this can’t be right
like you can’t be asking this much for a soccer t-shirt and so it was it was a
quick eject I got out of there and the funny thing that happens is I’m not a
big believer in empty retail stores and empty restaurants there’s a lot of
inventory sitting there a lot of money wrapped up there the lights are on the
rent cost money there’s labor at work there’s marketing dollars at work all
this stuff is in effect and we are not transacting anything so empty retail
space empty restaurants to me are dangerous and remember if you
can do things like loss leaders lost leaders are tried and true for a reason
they do work there’s times when companies and brands need to discount in
order to drive revenue into the business and as long as you deliver on that value
prop you deliver on your customer service expectations you can that gives
you a jumping-off point to grow your business and maybe you can discount less
in the future or maybe you continue to discount the point is be careful in what
you believe in and I would compel you to not subscribe to the idea that discounts
damage your brand there’s too many massive examples that
disprove that theory at the same time we all want to get to that top left square
that says demand is so high we don’t have to discount so let me make good on
the example of what happens when demand is outpacing supply and we still
discount and I love this stuff right this thing love this so you guys if
you’ve been watching my videos like and subscribe by the way I’m pouring my
heart into this thing so if you’ve watched my videos before and you saw my
chick-fil-a example as it relates to culture chick-fil-a is in a perpetual
state of not being able to meet demand meaning chick-fil-a is almost never
fast-food anymore they are almost fast-food because they’re so busy it
takes seven to nine minutes to get your chicken nuggets waffle fries and sweet
tea so what they have figured out is they went into the app business so you
go to the chick-fil-a app and when you use the chick-fil-a
app there’s tons of incentives in there that give you free product for using the
app what they’ve realized on the math is that the app gives them a certain level
of productivity that pays for that free food so they’re in damn they are in
danger of damage doing some brand damage by not keeping up with that demand what
they’ve realized is there’s a value to maintaining that demand that they’re
willing to pay for via technology and changing the way that you go about
conducting business with them via the app so there are even scenarios where
demand outpaces supply and yet we still are trying to discount because
strategically it makes sense for the business so that’s the big idea today
folks is that discounts are very dynamic one and and the second thing is please
don’t buy into the idea that discounts damage your brand they don’t our
behaviors damage our brands and that’s it I hope you enjoyed it I hope you
found it helpful I’ve enjoyed delivering it like and
subscribe we’ll catch you next time take care of my friends