Holding Up in a Tough Economy

By Irina Skaya

When the economy tightens, many companies resort to the mislabeled sales strategy of offering discounts. Discounting on price is not a sales strategy.  It's an impulsive move made by desperate salespeople.  In a tough economy, customers think and expect everything is going to be discounted.  Because of this, salespeople feel it’s necessary to oblige the customer to close the deal.  Unfortunately, the discount ends up altering the attitude of the customer who now believes the real value of the product or service they bought is the reduced price and not the full one.  Maintaining your pricing integrity in a down economy is truly a winning strategy because, in the end, profit margins are higher, the ability to service a customer is better, and the confidence of the salesperson is greater.

Although Starbucks (SBUX) has recently reported a 77% profit drop, the company is launching a multi-million marketing and advertising campaign "focused on the quality and values Starbucks offers ”  in order to combat perceptions that its products are over-priced.  The goal of the campaign is to remind customers why they’ve loved Starbucks coffee from the beginning.  In today’s marketplace where most are cutting ad spending and are offering discount with increase retail market share, Starbucks is taking a different approach.  I have to applaud Starbucks for sticking to its brand message and showing confidence despite closing doors to more than 300 Starbucks restaurants. Customers will shop where they feel confident in that business, one that is communicating and is sending the message out that it is here to stay, aka Starbucks.

At a recent ANA workshop, Don Sexton, Professor at Columbia University said companies who maintain or increase their marketing budgets during a recession experience higher sales growth than those who reduce or cut their budgets.  “Top Ten Ways to Bounce Back From Tough Economic Times,” written by Bob Liodice, CEO/President of the ANA also urges marketers to invest  in a brand more rather than less.