Marketing, Pricing and Value: a Black Friday Story

This is a guest post by Gerado A Dada, an excellent data driven business leader I met through my blog. Gerardo has been at the center of the web, mobile, social and cloud revolutions across more than 15 years of driving business strategy and product marketing for leading technology companies including Rackspace, Bazaarvoice and Microsoft. Gerardo is the author of the blog www.theAdaptiveMarketer.com and is on twitter at @gerardodada.

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Line at UGG Factory Store (1)Like most people in the US, during Black Friday week my inbox received an onslaught of promotional emails from every company I have done business with. All of them, without exception were promoting sales and discounts.

“When a marketer’s creativity runs out he defaults back to price discounts. “ (link: http://wp.me/pkYTD-6h). Creating a promotion or a sale is the default way to generate sales in the short term. Even though we know, deep down, that short term discounts erode value and train customers to expect discounts as JC Penney learned the hard way (link: http://www.fool.com/investing/general/2013/04/09/3-reasons-jc-penney-is-living-on-borrowed-time.aspx )

It was Black Friday and we decided to stop by the Factory Outlet in San Marcos – my daughter had an eye on a pair of UGG Boots that I was hoping to get at a good price. This is what I found:

(picture with a line of shoppers outside the store)

It was not that surprising to find a line outside a popular store, especially on Black Friday, but there were a couple facts that made this experience interesting for me as a student of marketing and consumer behavior:

UGG Australia was not offering any significant discounts. Many models were being sold at list price. A few had a small discount. I did not see any pair of boots being sold for under $175. A few feet away, a store had a big sign promoting 60% + an additional 30% discount on everything. You could get a high quality pair of booth for about $50. The other stores with long lines were Coach and Michael Kors.

These are my observations in relation to the experience:

  • Customers buy based on emotions. How can you explain customers lining up to pay over $450 for a bag made of PVC plastic? (optional picture) – by the way this product was backordered at the time I am writing this post.

  • The value of the product is not in its specifications, quality of the materials, features or benefits. The value is in how it makes customers feel. When you wear UGG boots and a MK bag, you feel like you belong, you feel fashionable, you feel successful. The product is the experience.

  • It’s not the price, or the discount, but the feeling that you are getting a good deal that counts. The shoppers in line felt good, even if they really did not get a good deal. The end price was not as relevant as the feeling that they were getting a good deal. After all, who likes paying list price?

  • Even premium brands need to provide the feeling of offering a good deal. It does not have to be a discount, though: sometimes free shipping, personalization or an accessory could do the trick.

  • All the talk about brands going away? Nonsense. Brands are, and will continue to be, extremely valuable. You can probably get a handbag of similar quality and similar design for 1/10th of the price at Target, yet customers happily stand in line and fork out their hard-earned cash for a brand.

My call to action to you: before you start you next price promotion, think about how you can build a brand, an experience, that makes customers feel great, and makes them happy to spend more money with you.


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