Leading with Price Will Kill Your Advertising, Branded Offers, and Ultimately Your Company

timjsmith

Tim J. Smith, PhD
Founder and CEO, Wiglaf Pricing

Published November 6, 2010

Nowhere in marketing today do emotions run hotter than when it comes to the role of (low) prices highlighted in advertising.

In boardrooms everywhere, one can imagine what’s being said, we need to make some money fast so let’s lower our prices, and let everybody know. So CEOs and CFOs carry the day while CMOs beats a quick retreat to let the ad agencies know what to do.

Only it’s a bad idea to lead with price in advertising. First, discounting, especially repeatedly, isn’t sustainable. One of the key advantages of a sale is the element of surprise. How does surprise register on people’s faces? Their eyes go wide, the mouth falls open; it’s nature’s way of saying: shut up, and notice the world around you.
Surprise aids stopping power in advertising, but surprise fades when you use the reduced-price trick over and over.

Second, surprise is really a pre-emotion. It’s brief (less than a second) and followed either by the verdict of the surprise being positive “wow” or a negative yikes! Repeating low pricing leads to expectations of future low prices, desensitization, and the impossibility of creating a wow response.

Shopper research has shown that seeing any price tag causes disgust. Instinctively, people don’t like giving up their money. So creating more delight regarding the offer, generating allure that exceeds feelings of disgust about surrendering cash, makes a positive purchase experience.

The problem is that a low-price strategy isn’t about the offer’s intrinsic value; it’s merely a desperate attempt to lower people’s disgust levels and, ultimately, given desensitization, is a losing game.

Third, a focus on prices is about numbers, statistics, and carries people from right-brain emotional involvement in advertising to left- brain analytics. That’s a bad trade-off, given that everyone feels before they think. Results from the IPA’s database of 880 marketing campaigns has found that emotionally-oriented campaigns generate twice as much profitability as traditional, hard-sell rationally-oriented campaigns.

Fourth, price-leading advertising creates quality problems for the offer. Let’s consider the value = quality/price equation. There, price at least gives the illusion of being a benchmark for inferring the quality of the offer. So what will a lower price do? It might help to shape perceptions that the floating, undetermined quality of the new offer is actually quite low, or that an existing offer was never worth what people have been accustomed to paying. Put another way, cheap doesn’t feel good.

Fifth, encouraging consumers to take a price-oriented, statistical, rational approach to purchase decisions can have disastrous, unintended consequences. That’s because, contrary to popular opinion, our emotions provide valuable insight. They steer us, given the conservative estimate that 95% of people’s thought activity isn’t fully conscious, hence intuitive and operating in the realm of emotion. To cut us off from the wisdom of our emotions has led many a consumer to make a purchase decision they soon regret.

Sixth, brand loyalty is at risk because pride takes a hit. Loyalty is a feeling, and how is a loyal user supposed to feel when they see the price is lower for everyone, not just them? Moreover, the company loses twice over. Existing customers pay less for goods they were already buying (and may not buy again at full price). As for new customers who bought a deal, their loyalty is less real than the profit margin sacrificed.

Finally, seventh, a brand on sale is a brand with an integrity problem.
A key way we judge the trustworthiness of others and companies, is the degree to which they behave consistently. With price-leading advertising, a company’s identity becomes fuzzy. Suddenly, you’re either a discount brand or are signaling a lack of confidence that, in dating as in commerce, is never very attractive.

Furthermore, leading with price suggests you have nothing else to say, or show, in advertising. Price as your main attribute doesn’t mean anything. The marketing battle is fought in terms of price and distribution. Loyalty ceases to be a barrier to entry, as surprise, hope, and every other positive emotional dynamic required, comes crashing down.

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About The Author

timjsmith
Tim J. Smith, PhD, is the founder and CEO of Wiglaf Pricing, an Adjunct Professor of Marketing and Economics at DePaul University, and the author of Pricing Done Right (Wiley 2016) and Pricing Strategy (Cengage 2012). At Wiglaf Pricing, Tim leads client engagements. Smith’s popular business book, Pricing Done Right: The Pricing Framework Proven Successful by the World’s Most Profitable Companies, was noted by Dennis Stone, CEO of Overhead Door Corp, as "Essential reading… While many books cover the concepts of pricing, Pricing Done Right goes the additional step of applying the concepts in the real world." Tim’s textbook, Pricing Strategy: Setting Price Levels, Managing Price Discounts, & Establishing Price Structures, has been described by independent reviewers as “the most comprehensive pricing strategy book” on the market. As well as serving as the Academic Advisor to the Professional Pricing Society’s Certified Pricing Professional program, Tim is a member of the American Marketing Association and American Physical Society. He holds a BS in Physics and Chemistry from Southern Methodist University, a BA in Mathematics from Southern Methodist University, a PhD in Physical Chemistry from the University of Chicago, and an MBA with high honors in Strategy and Marketing from the University of Chicago GSB.