The Fundamentals of Digital Discounting Smart PackQ: Why have there been so many cataclysmic stories over the past year about digital discounts-gone-haywire?

A: Because too many people had no idea what they were doing.

Marketers are almost guaranteed to get discounting campaigns wrong if they don’t understand a few underlying strategic concepts about what a discount is – and isn’t. Aiming to forestall any repetition of this maladaptive behavior, Econsultancy is pleased to share a few points from our latest Smart Pack, The Fundamentals of Digital Discounting.

1. Discounting is a behavior

It’s not just a business tactic; it has deep anthropological roots in gift giving, a fundamental practice of social relations. Gift giving has the power to alter psychological relations. For example, if a discount is done to clear merchandise out of a warehouse, customers know that the “original price” was higher – and it could hurt your brand if they perceive your brand as being forced to give, out of weakness.

2. Not just a price reduction

A discount is part of a master strategy that theoretically is organizing everything related to a business. This strategy will determine the form, target, and location of a discount. A discount doesn’t emerge from a vacuum; it’s an action that is the result of a process. 

If you don’t have that process, you are acting arbitrarily. Sure, throwing darts in the general direction of a dartboard sometimes produces a bull’s eye. But, the odds are also good that a bystander will get blinded.

3. A Discount is also a notification

In order for a discount to be successful, people have to be aware that it’s happening. If a discount happens in the forest, and no one’s there to buy the merchandise, is it really a discount? If your goal is sales, and not metaphysical exploration, the answer is a pretty clear “no.”

4. Because of technology, notifications aren’t the same

In some respects this is a no-brainer, but it’s important to isolate what it means for discounting. What “soft” technology companies like Groupon, Gilt, Google, Facebook, etc, are doing is discovering new ways of notifying consumers through their digital devices.

The reason that digital discounting has become a focus of these companies over the past few years is that there’s a lot of money to be made in providing the notifications, and no established monopoly over the service. Moreover, because shopping interfaces can be added anywhere on the Internet there’s no technical limit on who can participate in the gold rush – even media publishers with little background in direct to consumer sales have gotten in on the game.

5. The Next Big Thing (TNBT) is the same as the Last Big Thing (LBT).

Whatever the “thing” is changes, but the pattern – sometimes called “the hype cycle” – that accompanies TNBT doesn’t:  

  • Prepare for TNBT!
  • Are you excited for TNBT!
  • Are you having problems with TNBT?
  • As it turns out, TNBT is terrible when people do it wrong!
  • TNBT is the LBT!
  • Prepare for TNBT!

During bubbles of enthusiasm, people make mistakes. Don’t let this happen to your brand.