Jos. A Bankrupt - A lesson in discounts

If you are a retailer of men's suits, do not make it appear that you are perpetually going out of business. That is the well-claimed territory of rug and furniture stores. Jos. A. Bank constantly advertises discounts of its products. And if there is one rule about bad branding everyone should heed, it is that discounting your product literally decreases your value. How can you claim to have "the finest men's clothing at" your store when it is so cheap, and you are so desperate to get rid of it all through crazy sales?

These are men's suits – a product category that is associated with wealth and class. Bargain hunters are rarely dressing in Armani. So I must assume, by the persistent "buy one get two free" and similar ad campaigns, that at least one of the following is true:

1. Jos. A Bank is desperate for shoppers. 2. Jos. A. Bank suits aren't very good. 3. I shouldn't ever expect to pay full price for a suit from Jos. A. Bank.

Here are the problems with discounts:

1. Discounts sacrifice profit. You can't stay in business without making a profit. And discounting, no matter the volume, equals a downward trend in growth. Wal*Mart is cheap, but it spends a lot of time muscling down the cost of its products to tenths of a cent. Now, Jos. A. Bank may be doing this – but then #2 above would be true. Cutting costs means cutting quality.

2. Discounts bring quality into question. Things of quality cost money. Things that don't deserve full price aren't worth buying at any price. And whether or not your product is worth its price, giving it a price lower than it is worth frames it as "low-quality."

3. Discounts assume nobody would buy the products otherwise. Discounts exude low self-esteem. There is, after all, something to the axiom think rich, grow rich. Sticking to a price means that there is something worth sticking up for. If people know you'll move the price down, they'l know to wait for you to do so.

4. Discounts literally decrease value. Value is the ratio between what something costs and what it is worth. When you lower price, you may mistakenly think that you're properly affecting that ratio. However, price is such a vehicle of the overall message of a product, a stated price affects people's ideas of what something is worth. A car that costs $250,000 is, perceptually, more valuable than a car that costs $50,000 – say they're both luxury vehicles. But make either of those cars $15,000, and people will wonder what is wrong with them. Simply by lowering price, you can successfully devalue a luxury item.

5. Discounts attract cheapskates. Once you give people the idea that a price can be lowered, they hope the price can go even lower. A discount is appropriate when you capitulate, trading breaking even for making a profit. Cusotmers don't know where that line is, and "cheap" means "as cheap as possible."

The lesson: lowering price is a failing game that demands your customers see your products as not worth their money. It's bad branding.