Discounting is slowly killing your brand: the hidden cost of promo dependence and how to break the habit with Nabeel Siddiqi

Speaker A: More to Marketing. Welcome to More Marketing, the podcast that explores marketing product and everything business. I'm your host, Susan, and today is all about how discounting is slowly killing your brand, the hidden cost of promo dependence, and how to actually break that habit. So today we're talking to an expert who actually has been working on this for a very, very long time. He has been seeing the struggle that many brands have been doing and a lot of them don't understand that they're actually addicted to discounting. This constant promos, the never ending flash sales, and the creeping fear that if you ever stop discounting, your revenues will fall off a cliff has been something he has studied. My guess is Nabil Sequel, founder and CEO of Price Perfect, an AI powered pricing platform that helps brands turn pricing and promotions from a gut feel into an actual repetitive, repeatable and profitable system. He has spent more than 12 years in pricing, including a principal data scientist at BCG where he actually drove over a billion dollars in client value. He also holds a master in data science from the UC Berkeley, and he has also been sharing his knowledge very generously. He has been on CNN breaking down the AI driven airline pricing. And he also writes and speaks extensively about how having smarter pricing, discounting experimentation can actually help you unlock, uh, 5 to 15% more profit without you having to race to have a price at the bottom. And I've seen that a lot. I'm actually very excited about this conversation. So today we're going to be unpacking why discounting is slowly killing a lot of brands, the hidden cost marketers aren't actually seeing, and how to actually break this dependence because you want to actually protect that revenue and brand equity and keep it safe and not have to be this dependent. So welcome Nabil.

Speaker B: Thank you for having me, Susan. Pleasure.

Speaker A: I, I am so excited because you started off being a data analyst, um, being a scientist, knowing everything there was about data, found these problems, made your own business. Tell me your story. How did you get there? How did you see all this?

Speaker B: Yeah, um, I think I just kind of fell into it. Uh, so I had a bit of a technical background going into consulting. I was a quant in a hedge fund. And then the subprime crisis happened and uh, I went back, got an MBA and then got into consulting. Uh, because the only thing at the time was that was really hiring was consulting. Uh, and so I just kind of fell into it. I really didn't have an interest in consulting. I never liked being in front of an audience or anything. Um, because in consulting you do that a lot. Um, and uh, and so I just got into it from there and when I got into consulting, one of the most technical areas that existed was pricing. Because pricing traditionally was, you know, you take a bunch of data and you kind of estimate, you know, what is the willingness to pay and how people are going to um, you know, respond to a certain price, uh, of a product and things like that. So got into it from there and it just, you know, kind of fell in love with it if you will. It was a very difficult uh, area. It is interesting because pricing kind of lands between marketing and finance. Right. Um, it's, it's never, you know, part of it's, it's never simple yet it's also technical. And yet if you just do it technically you'll also fail completely. Right. You need to have more of a deeper understanding. And so yeah, I just, just fell in love with the complexity of it and, and you know, kind of just kept pursuing it and, and ended up in, in a uh, startup of my own helping small to medium enterprises doing the same thing.

Speaker A: I love that and I love that you found a passion in it as well. Tell us more about Price Perfect.

Speaker B: Yeah, Price Perfect is a software and service. Um, so we actually originally started as a general SaaS just you know, providing pricing for E commerce companies. Um, and we realized very quickly that people uh, that are kind of, you know, ICP is small to medium enterprises. Right. So probably the smallest we go is about a uh, million a year in annual sales, uh, end up. Um, and we realized very quickly that if we just gave them software, either they, you know, tried a little while to figure it out and kind of give up or they figured it out and then they would end up, you know, and pricing is, can be quite, you know, powerful and you know, with great power comes responsibility kind of thing. Uh, and so there's a good chance that you can shoot yourself in the foot. Um, and so they would end up doing things that are like oh hey, you know, this, this is horrible what happened, you know, is this not working? Um, and we realized very quickly that we also need to provide a lot of kind of structure around it. So we provide services, we provide a pricing workshop which helps them figure out the strategy and training on how to use it and everything. Uh, and then we have regular check ins with uh, uh, each of our clients, quarterly check ins to make sure things are going well and whatnot. Um, but yeah, it's essentially a pricing system that enables you to um, both kind of figure out new prices, figure uh, out what the right discounts are and also be able to help you set up and discount, um, bundles as well.

Speaker A: Interesting. I find that absolutely fascinating. Now let's, let's go back to the beginning. Ish. Because I'd love to hear more about. So I know that you've spent so much time in pricing. You've got a fantastic background in data understanding it. You've started this business as well. So you've got lots of intel at your disposal. What did you see in that, uh, work that convinced you pricing and promo were broken in most companies, or in many companies at least?

Speaker B: Yeah, I would say most companies. Um, and I think I can break that down in a couple different ways. But like in a line, I would say that, uh, pricing is probably the most powerful lever in a company. Um, and there's a great study actually that showed that a 1% improvement in pricing, uh, on average results in an 11 improvement in profit. Uh, and, you know, so it's clearly a very powerful lever in an organization. But if you go to organizations, this lever is, you know, like rusting, you know, and covered in cobwebs. Uh, it's just not being used. Um, and you know, the reason for that is complicated, but like, part of the reason is that pricing is hard. Uh, there, whenever you set a price, there's essentially two different roles that any price is doing. Uh, it's doing the role of perception and profit at the same time. Um, so if you think about it, if there's two t shirts on sale, one is $40, one is $80. Um, just knowing the fact that there's a t shirt that's $80 versus $40, you have a perception in your head, right? Like what it should be. You have an idea of what, you know, the material be like, you know, how heavy it will be, etc. Whatever it is, right. Um, and essentially the quality. So price is the first thing that a customer sees and it instantly sets a perception of what your product should be like. Right. Um, whether it is or not is a whole separate conversation, uh, that you find out when it sells, uh, or if it doesn't sell. But, um, so perception is a big part of price. And then of course on the other side, you know, right. Um, your price minus cost is your profit. So, um, it is doing both things at the same time. And I think that that complexity is what makes pricing really difficult. And if you think about it, that's like the core of the problem. So you asked about organizations. So in a, uh, larger, in larger firms, because Again, most of the clients that you know at BCG or, you know, you're Fortune 500, like very, very large organizations. At very large organizations, what happens is, um, you have essentially employees making decisions, right, about your pricing because it's just too large of an organization for the founder to be involved, uh, in the day to day. And uh, and so what ends up happening is that as an employee, your incentives are not aligned to take any risks. Right? Because this is also why, like, you see, large organizations don't really take big risks and whatnot. Because when you're an employee, if you take a risk, you're risking your job and your upside is you might get a promotion or slightly better bonus, you know, but like, it's not worth the risk to, you know, you know, put your risk, put your career, put your job at risk. So what ends up happening is you make small, relatively conservative decisions. It's the way it is. It's not the fault of any employee or anything.

Speaker A: Right.

Speaker B: I'm not, I'm not trying to blame anybody, but, uh, so what ends up happening is that when it comes to pricing, people don't, because of this complexity that we just talked about, people don't take that risk of adjusting. And if they do take the risk, then it's always just matching inflation. Or if they are part of a pricing division and they just have to do pricing because that's part of their job, then what they end up doing is they always like raise prices a little bit, which most people think is not risky, it is actually risky. They just don't realize they're taking the risk. Um, and so in large organizations, that's essentially what happens in smaller firms where like, you have an owner, founder, operator who's kind of running it, making decisions. What ends up happening is there's a bit of that element of fear, right? Um, this is their baby. They've worked so hard to create it. They don't want to risk it by, you know, setting a price and messing everything up. Uh, and then on the other side, um, is just a complete lack of knowledge. Right? Um, it's, it's difficult. Uh, there's so much there. And then if you go to the market to try to find like, service providers, uh, if you look at all like the really big pricing firms, um, that, you know, kind of handle a lot of things for you and they'll teach you how to do everything, they're like 500 million minimum annual sales. They won't talk to you, uh, under that. Um, and if you are, and the Vast majority of e commerce firms are less than that. And, and for them they basically have two options. There's two self serve kind of category, um, or pricing solutions in the market. One is competitor matching and one is AB testing. And both are horrible. And they're all reasons. And we could probably just do a podcast and just that. But uh, really quickly, uh, competitor matching tends to be problematic because it essentially is teaching your customers that your products are commodities, right? If you're matching your competitors always, or you know, above, below, whatever it is that you're matching, whatever rule you set, you are essentially a, you're outsourcing your whole pricing strategy to your competitor, which like I just talked about, is a really important lever, you should be using it. Uh, and then the other thing becomes that you're teaching your customers it's a commodity. And then finally, um, even if you are selling a commodity product, right, like you're selling that Samsung tv, you know, Model xyz, whatever it is, and everybody else is selling something, you still have some brand value. You have a brand, you've got a website, you get a design, you got customer service, you get all these other things that can set you apart to an extent. You don't have the flexibility of setting whatever price you want, but you don't have to necessarily match your competitors. Um, and that tends to be problematic. Um, and then on the other side, AB testing, especially for smaller firms, is problematic because you have a, ah, very short period of time, uh, where you can get, you want to get statistical significance for it to still be valid, right? Because you know your season is changing, trends are changing, social media is happening, all these other things are happening. Your marketing is changing, advertising changing. So everything is constantly impacting what the right price should be and what the best price should be. Whatever that's defined as, right? We can, we can get into what that's defined as. But, um, a B testing will give you an answer, but it'll give you an answer for what was right yesterday or last month, right? It won't give you the right answer for what is correct today. Uh, and in smaller firms that time delay gets bigger and bigger because you just don't have the data to get the right statistical validity. Um, so these are the options that are available to the small firms. And so I get it, why pricing would be scary. Uh, um, um, and you also, uh, and if we wanted to talk a little bit about it, promotions. And when I'm saying pricing, I'm kind of referring to all pricing decisions, but specifically in promotions, the Problem becomes that, uh, and what we talked about, the very beginning discount addiction is that it's problematic or it's broken because it's just so effective, you know, uh, and it works in short run. And you're basically giving up your long term kind of brand value, um, at the cost of your short term. Um, and again, it makes sense because for employees, they're often, excuse me, their decision is dependent on, you know, the short run. Um, you know, I want to make my bonus for this year and so I just need to get my revenue and show my, show my numbers. And so the misaligned incentives are there.

Speaker A: And so, yeah, yeah, it's definitely, um, ah, a big issue, particularly that knowledge gap. Lots of founders might be specialists in their field of technology or whatever the item is they've built, but not necessarily all those other working functions of the business to help them succeed into the long term. And I can see that being a huge gap, particularly when there isn't a lot of companies out there that could maybe assist them or that are affordable to them. Yeah. Now can you break down and unpack the idea of what discount addiction is? What are those symptoms that you see that you identify as part of your going into a business to go, yeah, you're definitely addicted here. You've got a dependence for hitting those targets. How do you go about that? Sure.

Speaker B: Um, I think first we should probably step back a little bit because there's two types of discounts that happen in um, e commerce. One is what I would call a promotional discount where the goal is to increase revenue, increase aov, average order value, et cetera. Um, and then the other one is, uh, what I call a markdown. And a markdown's goal is simply to get rid of inventory. Right. It's usually characterized by very severe discounts. Right. Like 70%, 80% depth. Right, right. Like big, big discounts. And the goal is again, just get rid of stock. You see this a lot in apparel companies, uh, where the season is ending, season end sale. And you know, they're giving away really good discounts for ah, a jacket or something as spring is showing up, that kind of thing. Um, so I would say, I mean, could have markdown addiction. But in general when we talk about discount addiction, you're really talking about promotional discounts. Um, so just wanted to clarify that before we get into it. Um, what are the symptoms? Well, the first thing that I usually check for is kind, um, of a year on year monthly revenue percentage that is coming from discounted sales versus full price sales. So Just look at, you know, we're, we're in the beginning of August right now. So, uh, if I were to look at July's, um, if I was an operator, right now I'm looking at July's, uh, sales and I'm looking at what percentage is coming from discounts and what percentage of sales is coming from full price as a function of revenue. Uh, and then I'm doing the same thing for previous years, July as well. And I want to see ideally like two, three, four years, um, of kind of this year on year monthly sales to see how it's. Is it increasing or decreasing for folks that are, you know what I would say, truly addicted to discounts. You should see an increase in your, um, proportion of sales that are coming from discounted, um, um, kind of sales and things like that. Uh, and, and the reason this is happening is because you're essentially this, per. This, you know, this kind of proverbial shop is essentially training its customers to expect, um, these discounts. And, and they're essentially waiting for discounts. And so what ends up happening is. And, and we, I kind of alluded to this in earlier is that your brand value starts deteriorating. So essentially you're teaching your customers to say that, you know, we say that this product is, let's just say, $100. Uh, but in actuality, you know, we really value it at whatever it is, 80 or 70 or whatever it is that it's coming out to after the discounted price. And so that becomes the new price in your customer's head. That becomes the how much it's actually worth in their head. Um, whether it is or not is completely separate. If it's an excellent quality product that even at 100 was a steal, it still will be at $70 in a customer's head. Um, and you know, you start seeing this, you saw this like when, uh, if you start going into like, you know, price history, which probably nobody does other than me, but if you go into like the 70s and the 80s, uh, um, and you know, you start seeing like, for example, China had started manufacturing a lot of products. Um, and a lot of those products quality was not great. Right. Uh, but they were really, really cheap. And so they came into the market, they were not really competing directly against higher quality products that were a lot more expensive. But it did really reset what people thought a product was worth simply because of the fact that there's a much cheaper alternative in the market. Um, and so that. That reset is difficult, that pricing psychology is not intuitive in how you really kind of look at it. Um, and so that's one thing I would look at, um, in terms of metrics. The other thing is that uh, if you are seeing a dip in sales after your promotion ends, so let's say you're selling I don't know, 100 units, uh, a week or something, um, before your sale starts and then like you have your sale and however much sells and then afterwards if you're not seeing that uptick back into 100 units a week or you know, pretty soon, maybe not the week after, like two weeks after or so there's uh, a pretty good chance. What's happening is what's called pull forward demand, uh, which means that people who, like I was saying, they're essentially waiting for that sale, uh, and people who would have purchased maybe at full price are just you know, loading up on it right now and then you know, later you are, um, they're not buying. Um, and so you're essentially kind of mortgaging your future in a sense, uh, in your future sales, uh, for you know, hits right now. I, um, think those are like the big ones. There's a whole bunch of others you can check. Um, you can look at like your repeat rate of customers that were acquired via discounts versus uh, acquired via full um, price and see if you're getting the same quality of customers. That's another big thing. Right? Like you're essentially this is, this is going towards customer lifetime value. Not everybody has the capability of doing customer lifetime value calculations. They're complex and you can make a lot of mistakes. Um, there's. But um, just looking at repeat purchase rate is an easy way of. It's an easy proxy for customer lifetime value. It doesn't get you quite there but it's a relatively quick proxy to look at. Uh, and I think the other big one is just if I were to ask you, um, at a gut level, uh, and assuming you're an E Commerce operator, uh, that if for the next 90 days you cannot do discounts, like does that scare you? If it does, there's a pretty good chance you're addicted to discounts. Um, that, that's kind of the easy way to look at it.

Speaker A: I think that's a great question to ask them. Um, I, I'd love to know your opinion on. So there are many times when during promotion time that you might have, like we might use Samsung, they might offer incentives that you can pass on to your customers. So everyone gets $1,000 off the fridge or there might be a government rebate saying if you put in an energy efficient product you get $1,000 off. Everyone has access to these rebates or these kind of manufacturer discounts but sometimes they change or stop because either the government funding's cut off or Samsung has just said this limited time period only. How, how do businesses adjust there when it comes to this? Because it is kind of a discount and I'm sure they've used it in an addictive way. How do you think they should plan for those activities? Um, knowing that there will be changes or ends to them?

Speaker B: Yeah, I think um, the big one is that like you, if you are somebody who's like a multi brand retailer uh then you usually don't have a ton of options. Right? Like if, if you are selling Samsun Samsung Fridges, uh, as in your example, part of your contract with being a distributor or of Samsung is that you have to follow their minimum uh, advertised pricing requirements, their uh, sales and all this other stuff. And usually uh, it depends on the country and laws and everything else. But usually you'll also have a data sharing agreement uh, where you're also providing that sales data to them. Um, so they are often doing that pricing for you in a sense. Um, you are of course allowed some level of, usually some level of kind of flexibility on how much margin you're charging. Of course there's minimums, uh, but usually there isn't a maximum. Uh again you probably don't want to go near maximum but you know just, just to understand where your flexibility is. That being said I do think that um, and again this again it depends on your agreement. So please don't go off and do this without you know, checking your agreements. But what you can often do is like let's say again you're selling Samsung Fridges and you've got a couple of other um, let's say brands that you're selling. One is that you go to other brands and say hey look, Samsung is providing this um, discount. I'm afraid that your um, stock is not going to sell so you should probably provide a similar kind of discount. Now this does get into pricing regulatory issues in certain countries, right? Because in a sense it is a form of collusion. So but you as a retailer don't have to worry about that because that's not uh, on you, it's going to be on the manufacturer because they're the ones who made deciding whether to uh, follow suit. So you can ask for it all you want. Um, it's a little bit of a gray area. Um, and so that's one thing. The other thing I would say is that even if you can't do that, if you do have certain flexibility of how you sell things, one uh, of the things that I have seen that helps a lot is that allows you to still drive really good AOV and not really impact that kind of customer perception so much is to add bundles into the picture. Right? So you go to Samsung and you say hey look, uh, one of the things when we're selling the fridges that we've realized is we sell a lot of these, you know, kind of third party accessories that are like ice trays or you know, something else that is kind of being bundled in um, ah, or sorry that are add ons. Ask them if you can bundle them with that sale, right? Be like, hey, Samsung's providing this great discount. We also recommend that you, you know, in, in addition to the discount, you know, you add these add on items. Um, and that drives up the cost, total cost that is for the customer. They get more for it of course, but then it's also a nice bundle of, of things that they're getting. It's also tends to be curated, right. Because you tend to be an expert in what sells and what doesn't sell. Um, there's a whole art to bundling. We can all, we can do a separate podcast on that. Um, but you know there's really quickly. There's basically three decisions you have to make in bundling. First is what products to bundle. Second is what uh, are the prices you're going to set. And the third is how do you handle your inventory? Because if one item of that bundle is out of stock, that bundle is no longer the same thing. Right. And so you have to be a little bit careful. You have to have good inventory management. If you can't just you know, kind of try to do this uh, accidentally. So be careful about that. Um, but yeah, I think those are the, those are the ways you really don't have a ton of options just because the pricing is dictated by your supplier.

Speaker A: Interesting. Thank you so much for sharing that. Now how should actual marketers think about these roles of discounting, bundling and offer structure to as actual levers in their profit system? Because you've mentioned all these great ones like um, inventory control is so important. Doing add ons can, can help you increase your average order value and improve the margins as well from the discounted part to the non discounted part. But um, what roles to discount bundling offer structures actually help in those profit systems?

Speaker B: Yeah, I mean I, I think we've talked a lot about, you know, how horrible discounting is. So I don't want to say discounting is always bad. Um, there are scenarios where discounting makes sense. You have to be kind of um, careful about it. But the big I, I would say strategic reason that is almost always okay, uh, is if you're using discounts to capture a market segment that you wouldn't have been able to at full price. Right. Uh, and again when you do that you need to be tracking what is the repeat rate, what is the customer lifetime value of the folks that are coming in from discounts versus full price. Because you do want to make sure that you know, you're if be cognizant about it, right? Like it's okay if they are lower customer lifetime value. I'm not saying, you know, get rid of the customer but uh, at the same time just be aware that now you know, this uh, is a lower customer lifetime value. So therefore my customer, the cost of customer acquisition should be lower and proportionately, you know, be able to manage and so be, just be aware of it. But I do think that that is a, a very legitimate and very valid use of discounting if you really want to grow and capture more market. Um, but again make sure that you're actually capturing market, you're not just giving your discounts to your existing customers. Um, it's okay to do that. Again, like loyalty is a great example that you know, you should be using discounting for loyalty. Uh, it keeps customers more loyal and they end up spending more money in their lifetime and they end up being much better customers, uh, if you reward them properly. But again you have to be cognizant of it. Discounting. The way I think about it is discounting is like a double edged sword. You can easily be very effective but you can also cut yourself. So just be aware of that. Um, I think bundles is something that we haven't talked too much about. I just kind of touched on it a little bit. But um, I almost think of bundles a little bit opposite as discounts. In bundles you're trying to charge less for the same thing. Um, and sorry, in discounts you're trying to uh, you know, charge less for the same thing. In bundles you're trying to add things uh, and sell them for more. So in a sense it's a different kind of perspective, um, and a different way of approaching it. Uh, the good thing about bundling is it doesn't have that negative impact. You can still provide a discount on a bundle and because it's a bundle, it's not as easy to compare. So even if you are selling whatever it is, a $80t shirt, I think, is the example that we're talking about earlier. Uh, if you're selling two $80T shirts for, I don't know, 120 bucks instead of 160, um, it is a different way of thinking about it. So customers are not as quick to kind of discount the value of that product because at the end of the day, they end up shelling out more in terms of capital. Right? They end up spending more money. So that kind of, um, deterioration of brand value does not happen as much in bundles. And so I often will. If, you know, you have a scenario where, you know, you're just doing bad, you just haven't gotten, you know, the growth that you wanted, whatever, and you would have turned to discounts, I often find that bundling is a better option if you can kind of make it happen. Now, of course, not all, you know, e commerce companies can do bundling for whatever reason. Uh, but if you can, it's definitely something, um, to explore. Uh, and then, of course, bundling, the big advantage is that it is a curation, right? And that has value. So if I am, I don't know, selling, um, photography equipment or something, creating that content creator bundle for folks that are not photography experts, I may be like, for me, it may be obvious that of course, with a camera you need to have a memory card or a lens or whatever, but that isn't the case for everybody. And so being able to have that curation has a lot of value. Um, and you're providing it at a discount and they're going to buy all that stuff anyway. So all of these things really add up in value, and I think it's quite effective. Um, and then finally, I think the big thing that I would also touch on, I'd say again, this could be another podcast, is, um, price architecture. Price, uh, architecture is something that you don't see a lot of people talking about, or I haven't really seen anybody talking about. Um, and there's a whole bunch of things to it. But I think one thing in Price architecture is pretty important is this idea of good, better, best. So good, better best is a general idea that when you're selling products, you should be selling them at kind of three tiers of quality, if at all possible. Uh, so, uh, again, the $80 T shirt. $80 T shirt is probably the best one. Uh, but, you know, you should also be exploring, sell it Selling maybe a dollar sixty and a dollar forty, maybe not sixty, forty. I mean you have to figure out what that right range is for your customers. But the idea is that at $80 you only have a certain market segment that you can get to. Uh, at $70 that market segment there's going to be some overlap but there's also some extra folks that are kind of now in market. Right. Um, and then at you know $60 maybe there's some more folks. And so being able to have that quality tier gives customers the ability to kind of trade up and down as they wish and they get more control over how they spend their money. And that kind of price quality trade off. Um, and it also enables you to get more market share. It is more inventory work. Right. Because now you have even more ah, you know, products and you know in apparel of course inventory is not just a product, it's also the small, medium, large size and the colors and all this other stuff. Ah, but it is quite effective. Um, and it's a way that you can get folks, you can increase your aov, you can increase your revenue without resorting to discounts. And so it's not intuitive to necessarily think of those as kind of alternatives but it is at the end of the day getting you to close to the same result.

Speaker A: I find um, pricing architecture really interesting because I think a lot of companies can do this automatically even on the brands they might be selling on their websites. So if we say a high end fashion versus an everyday use versus a home brand or whatever it might be, they, there's different ways that that can be done for similar things where the item is comparable to a point that each has their own merits.

Speaker B: Yeah, yeah, no, for sure, um, being able like yeah, if you, if you, it's a great point. Like if you are a multi brand outlet uh, and you have like the Samsung Fridges that we're talking about, then getting a higher end brand and getting a kind of a lower brand just to be able to give customers options is a great, is a great way of um, increasing your market share and increasing, increasing your overall sales for sure.

Speaker A: Now if there is lots of marketing CMOs out there listening and thinking that's us, we wouldn't be able to survive the 90 day question. We've definitely got that higher percentage of volume going through on discounts versus non discounts. Um, that's us. We've trained our database. Oh no, we know that Black, Black Friday, they just wait and they mortgage ahead and everything like that. What are a, ah, few of the steps two or three that you first start off with to help try and wean yourself and try and take back control.

Speaker B: Yeah, um, I think the kind of mantra here is, uh, you know, measure, measure twice, cut once. Uh, because there is like this will impact your bottom line very quickly and top line I guess too. Uh, but, uh, so, so be a little bit careful if you are like you mentioned, like um, a database or like a list. So if you're sending these discounts and these promotions via email, uh, that's the best scenario to be in because you can very quickly start testing that. Right? So you don't need to send everybody the exact same discount. You can start sending it to certain groups and not other groups, um, and certain segments and other segments. And that will very quickly be able to show you that these are the groups that are really, uh, price sensitive versus not right. So that's the first step, right. Is kind of being able to try to separate. If you're not on a list, this is a little bit harder to do. But if you are on a list, um, this kind of makes it really nice, um, and very easy to start that segmentation. Um, and what you're doing with the segmentation, the ultimate objective is to try to reduce the percentage of folks that are like the bargain hunters and discount seekers. Um, and try to, you know, really focus on the folks in the segment that is, um, able and willing to pay your full price. Right. And, and is, is actually valuing your product at full price. So that's kind of what you're aiming to do. Uh, being able to do it on the list is very easy. Being able to do it in an actual, like if you're running promotions like via ads, uh, you can do some targeting, um, some targeting control can kind of be there. It's not as nice and not that as easy. Social, uh, media is of course a little bit, uh, easier because usually you have some kind of control. Uh, but yeah, I mean I, I can leave that to, to the marketing. You know, if you're, if you're a cmo, you know how to do that. Um, the other thing I would say is that you, uh, look at other kind of ways to bring people in. Right. You know, you know that if you're running an ad with a, you know, 40% discount, you'll get a lot of folks, you know, that. Um, and start looking at things like, uh, you know, a special, you know, limited time bundle or you know, some kind of exclusive drops and early access to certain products and things like that to Also to keep that hype going, but at the same time it isn't at the cost of your, um, you know, your, basically your discounts and, and profit. The other thing that I've seen that works really well is instead of doing discounts, provide a free gift. Uh, this is kind of goes back to bundling. In a sense it's a bundle, but a uh, free gift and advertising, a free gift tends to work really well and yet not be as expensive, um, as a general flat discount, especially if you're a slightly higher ticket item. Then it becomes really, really easy to do that. Um, but I think the other thing is to make this trans. I think the final thing I'll say is that the make this transition a little bit easier. There are uh, some things called personalized discounts. I hesitate to say this because certain countries this is not okay. Certain countries it is okay. Mostly in Europe, but some countries not fine. In Australia it's fine. I know this because we've uh, I've done this with a, with a client there. But, but um, the idea about personalized discounts, and it requires a little bit of infrastructure and set up, but the idea of personalized discounts is kind of what I was going back to. The list where you're selling, you're sending discounts to that person based on their kind of behavior, based on their um, segmentation. You can do this at a segment level, you can do it at an individual customer level. It depends on the infrastructure and how much data and everything else you can do. Uh, but like I said, this can be a little bit more sophisticated and complicated. But the idea is again it's. You can kind of wean off that discount very quickly, very nicely, um, and gradually. Right. Rather than just saying, oh, we're not going to do discounts tomorrow and then completely tank your sales. Um, that is I guess a way of doing it that you know, kind of quitting cold turkey, if you will. Uh, but uh, it tends not to be a good idea. Right. You're going to hurt your revenues in the short run, which enable, I mean that's your, in a sense your war chest to be able to leverage tomorrow to you know, do product development and advertising and everything else. So, uh, avoid that. Hopefully that should be obvious, but, um, yeah, I mean that that's how I would do it if personalized discounts are a nice way to kind of ease yourself off of that without too much trouble.

Speaker A: Fantastic. Thank you for sharing those top tips. I really, really appreciate. I think there's a lot of learning out there for everyone, even those that aren't addicted. There's still a lot of options there that people can start adding to their different types of tactical offers that they do. Now, I have one question that I ask everyone. You were pre warned, so hopefully you have something in mind. What brand, any brand in the world best represents you and why?

Speaker B: Yeah, I thought about this one actually. Um, I asked my wife about this as well, but I think, um. So it's a brand that you probably don't know. Uh, it's called Gyokucho, which is a Japanese, uh, pole saw. So I'm an amateur carpenter, woodworker. Right. I'm not at all an expert at it. Uh, and there's these type of saws that exist, they're called pull saws. Uh, if you've ever used a normal saw, uh, it tends to be a little bit heavier, thicker metal and you kind of have to force your way into cutting something. Uh, and if you are slightly off at an angle, it'll buckle, uh, and can injure you, but it's kind of just annoying, it gets stuck and all this stuff. So, um, the Japanese came up with this thing called a pull saw, which is the teeth are slightly in a different direction and you put it down and you cut by pulling. And the advantage of that is that because you don't have to make it thick enough so that it doesn't have to worry about buckling and stuff because again, you're just pulling. It's always in tension. The cool thing is that, um, it can be very, very thin. So if you want to make a really precise thin cut, usually, uh, like if you want to make a flush cut, you're using a pull saw. Uh, and so this is a weird brand. I, uh, bet nobody else has thought of this or on your podcast. But, um, the reason I think that this kind of brand is representative is, um, there. It's, it's like if you think about pricing, and my career has always more or less been about pricing, it's, you're putting effort in, it's just almost in a different direction right in the way that a POLSA is, you know, in polling rather than, and pushing. And it's not that there is a lot less effort. You're still putting effort in, you're still having energy, but it's not quite as brute force. And if you look at a lot of growth tactics, they're, you know, more spend and more advertising and more traffic and more. And, and that is a very kind of brute force way of doing it pricing is a slightly different direction and a little bit more um, subtle. It also requires um, being able to use a pulse all like the first time you use it in it requires you to think a little bit differently. It's kind of a different habit, it's a different way of doing it. There's a little bit of knowledge there. Um, and again pricing is like that as well. Um, and then finally this is a tool, right? Nobody is like again, I'm an amateur woodworker so I will go show off my rocking chair that I built. I'm not going to show people, oh, this is a really cool Japanese pole saw I have. Um, and pricing is like that. Pricing's a tool. At the end of the day, uh, you don't see all the successful E commerce firms you see, you don't see the kind of blood, sweat and tears that went into pricing and everything else in the background. Um, but it's there uh, and is what makes them successful. So I think it kind of fits.

Speaker A: I love that and I love all your thoughts that went behind that too. Thank you so much for sharing that and tell your wife you did a great job helping you as well.

Speaker B: For sure. She's the marketing expert so probably that's where her uh, strength is.

Speaker A: I'm just going to do a quick wrap up and then you can add any final notes to it. So today we're talking about why discounting is good but also we don't want to get addicted to it everyone. So pricing is a uh, very powerful lever in companies and it's actually part of what builds you as a brand because it's a lot about the perception and the profit. So it's something to be taken very seriously if not the most serious thing that you have in your kit and caboodle. Incentives can be seen as a risk and a fear factor within businesses, particularly if they don't want to change because they're seeing some results. And this could also be from lack of knowledge. So in those cases definitely go out and try and find an expert to help you with pricing or the right product bundles or wherever it might work. Now a lot of companies still do two very basic things. One, they either look at the competitor and try and price match or two, they do a B testing which does have its merit but it's also a delayed result and you're looking at the past, not the future. So it's very hard to do predictions there. So this is where you need to decide what type of discounting you're going to do. Within your organization. Now, just to clarify, there are two types of discounts. You've got your markdowns and that's when you're just trying to get rid of inventory. M and that makes sense. You're trying to clear stuff, get it out. It's not something that is ongoing. It's a let's get rid of this and then that's not coming back. Whereas we're going to continue talking about promotional campaign driven discounting, which is where you're trying to get that volume, to get that nice hit of cash flow, but probably at the expense of a lot of revenue you could have had if you did it a different way. Now, how do you know if you're actually addicted? Uh, one of the great ways to ask yourself is, could I do 90 days with no promotion at all? And feel comfortable. If your answer is, uh, no, or you're already fallen off your chair having a heart attack, you are definitely addicted. Another way to look at this is also looking at your numbers, actually looking at how you've performed month on month, year on year, and see how you've actually done sales. And this would be volume and revenue based on discounted and full price items. And if you start seeing that trend, that more than likely is there. If you're already worried about this, then you probably are addicted. Another thing that, um, you may do by accident if you are doing a lot of these discounts is you're training your customers to wait and you're potentially doing some brand, uh, issues there too by having the value reduce. We don't want to deteriorate that very important brand element that you've been building on. One of the key ways you could look at this is if before you had a sales you did a hundred and during sales you might have jumped up during this campaign to 200. But when you settled back to norm, maybe over a three week period or whatever, normal looks to you and it goes down to 80, you've probably done a bit of moving people from the future into that sale period, which is probably going to impact you and make you panic and want to do more discounts. I've seen this a lot during my career. I call it the donut effect myself. Particularly if you're coming up to Christmas, people put out Christmas catalogs, you get an injection of sales, then you might have a two week period before the big Christmas rush happens and it nerd out. Everyone starts to panic because sales have deteriorated, they've dropped back down to normal rates. When people are like, it's Christmas they should be buying and then a uh, major discount is forced on you like 40% off site wide or whatever it is. And then suddenly you get the sp. That spike was always going to happen with people buying at that time of year. You've given away margin and it was, wasn't necessary. So that's what I call the donut effect where it's up with sales, down with inside donut and up again. Yes, it looks great but you've probably lost some value there that you could have kept and that's called um, the pull forward demand. Now one of the things that you should also consider as well is your agreements that you've got with the companies that you sell. There might be opportunities there to do price changes or get them to do some rebates or discounts for you. It doesn't hurt to ask. And other things that you can do to actually help you get off this cycle. 1. Know your segments, know which ones to do, full price, which ones to do promotions. If you're chasing a new segment, that's okay as long as it makes sense. You're going into a new market getting increased sales which you wouldn't have had beforehand. So that can be a positive thing. But make sure you can measure that and put it into place. Another is you would very much like to keep people loyal. So discounting can be part of that strategy because you're getting that increase of the customer lifetime value there, which is very important and particularly that repeat purchase rate of what's going through versus everyday people. 3. Bundling. Bundling is a fantastic opportunity where you can have add ons, where you have that mix of product, price and inventory built together to have something powerful that people think they're getting great value from. But you don't have to lose your margin the whole way through that. You would have if you did straight discounting on the one product and not bundled. It's seen as value. So it's not very easy to compare apples with apples when you do those bundles. Which means consumers won't be as tempted to go to a competitor if they can't do a straight value comparison. And then another option you could do is if you can, depending on what you sell, is price architecture good, better, best? Those quality tiers can help people make decisions. And if they're priced well, you may not even have to do discounting because people will naturally go down to a lower one if they think that's where their value sits. But ultimately, how do you get yourself off this? If you're on this Merry go round segment where you can. Segmentation can help you. Personalized offers can help you as well. Look at how you're actually communicating and what channels and see if you can do testing there. Abs. Also see there's opportunities to do limited time offers or early access or if you have it and it can work for you. A, uh, free gift too, can always move people off because the gift may be. You might be able to purchase that at a really good rate and it's actually cheaper than the discounts you were giving away and that perceived value is higher. How did I go? Nabil, anything else you'd like to add?

Speaker B: No, that was, that was excellent. Um, I would just listen to that rather than the rest of the podcast.

Speaker A: No, no, no, that's just my summary.

Speaker B: Yeah, I thought it was great. I think you hit all the good points. Um, if you want me to add, I would add while you were talking. Um, is that markdown addiction can also happen? Uh, we didn't really talk about it. And if that's happening though, it's a much, it's a symptom of a much bigger problem. Right. There's a pretty good chance that you just have bad inventory management or your, you know, price is just completely off and people are not buying at full price and all sorts of. So if you're doing a lot of markdowns, that is a whole separate problem. Um, so, yeah, just fantastic.

Speaker A: Thank you. Thank you for reminding everyone on that tip too. Try and predict well, if you can and learn from your lessons of the past.

Speaker B: Yes, for sure.

Speaker A: Now, how can people follow you and learn more about you?

Speaker B: Um, I'm probably the easiest way to get a hold of me is LinkedIn. Um, I'm regularly posting on LinkedIn and everything else. Of course we've got PricePerfect AI, which is the website, um, and you can set up for a demo. And we don't do just a demo. We also do a price audit for folks. Uh, and so that gives them a little bit of an understanding of how, how externally people are seeing prices, uh, and how they should be exploring it. Like for example, price architecture is a big thing that we check for. Um, and so, yeah, that's probably the easiest way. Uh, do a demo even if you're not interested in the software. Happy to help out people understanding it because I mean, small to medium enterprises are the backbone of the economy. Uh, and if we're not helping them, then, uh, we're going to have other problems further down the line. So.

Speaker A: Yeah, thank you, thank you so much.

Speaker B: For having me.

Speaker A: No, no, I'm so. I've. I absolutely love everything you've shared. I'm going to add all your details into the show notes as well so everyone can keep in touch with you, follow you and learn from you as well. And don't forget everyone else to add more to marketing to your playlist so you don't miss out on future fabulous guests. More M to marketing.