Businesses Are Hurting Their Own Future

by Thom Hiatt

Every day I get 10+ emails with deals, discounts, and giant special offers. Some deals are good for a month, and some are good “for only 15 more minutes.”

  • 52% off sushi
  • Buy one get one free kayak tours
  • Free Lasik with a Tummy Tuck!

Whether the offers are social, group-based, or printed coupons, customers are drawn to these incredible deals for good reason: The economy still sucks.

But what happens when the economy is better? Well, customers may have higher incomes, but they’ll be so used to getting ‘deals’ that they won’t be willing to pay the ‘regular’ prices that existed “back in 2010.”

Five Dolla Footlong

Perfect example: I won’t pay more than $5 for a footlong sub at Subway. Their ongoing marketing has taught me that a 12″ sandwich is worth only $5… at any chain or sandwich shop. And $5 seems to be the sweet spot. Every fast food joint has a $5 box, bucket, tub or meal deal. How will you feel when a “meal” costs $8 or $10.

As the economy improves, how will businesses try to re-teach the new prices (which are actually the old prices) to customers, without making the customer feel ripped off? How will Sam’s Sushi compete with Sara’s Sushi when Sam wants to raise his prices back to normal, and Sara doesn’t want to budge. Sam will feel forced to stay close to $5. Long term damage for both of them. Granted, Sam and Sara have to compete when everybody else has dropped their shorts. If they don’t compete, they go out of business.

Unfortunately, most businesses feel forced into a discount program that they admit doesn’t really benefit them. After all, if I spend $10 for $20 in food value, who gets the $10? Well, sure some of it goes to the restaurant, but a good chunk goes to the advertiser. In the end, the restaurant simply breaks even all while trying to make a happy loyal customer. The problem is that the customer’s loyalty is to the deal and not to the restaurant or service provider.

What’s The Solution?

Restaurants and service providers need to begin steering away from the advertised dollar amount and look instead at added value. Instead of offering your pizza for half off, raise the price back to normal and seriously increase the benefits like free breadsticks, free soda, etc. Over time, reduce the benefits one at a time. The change may take couple of years, but your pricing would be consistent.