What was that DVD you were given for Christmas worth? Did your relative love you enough to pay £15 for it or did they shop around because they only wanted to spend a fiver on you? Zoe Williams said in The Guardian that pre-Christmas sales and the internet were destroying our sense of what gifts are worth. In a similar vein, the editor of Music Week recently bemoaned the way Tesco had been selling Lily Allen’s CD for a fiver earlier in the autumn, saying it undermined the value of CDs.
Now you may feel that it’s all to the good that the cost of over-priced products is forced down. The problem is, price has always been an important part of marketing and if our customers cannot get an indication of the quality from the price, we have lost a useful marketing tool.
Discount offers are useful but they work best when they can be judged against a standard price and when there is a clear reason for them. That’s why an end-of-season clearance works so well.
My experience is that price-cutting may boost sales short-term but customers soon adjust their expectation to the lower price and then further discounts are needed to gain sales. Compare the way jars of instant coffee keep dropping in price and sales keep falling too, while the cost of a latte at your favourite coffee house, despite the competition, goes up and up.
Unique, or at least specialist, products will continue to command a premium price. The victims of price wars are the products in the middle that are neither top sellers nor in a niche market. These will suffer most if they are made to seem overpriced by continuous Sales and pile-them-high-sell-them-cheap supermarkets.
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