The paper 'Price Discounts and Brand Equity" is an outstanding example of marketing coursework. Marketing is a function that positions a brand or rather builds brand equity; which to the minds of the consumers is the real value of a product. It is important for marketers to realize that consumers evaluate brand equity or value in relation to the price being charged. Therefore, it is true that there is a link between prices charged to a commodity and its brand value (Kotler, 2006). Price Discounting and Why It Is So Prevalent: Price discounting refers to the prices incentives offered to consumers at given times as inducement to attract more buyers (Saktishree, 2011).
This could be new buyers or repeat business buyers. It is usually used as a sales promotions tool which urges and persuades the customer to buy ‘ now’ and not a later time. Price discounts encourage sales though there have been debates on whether the price discounts impact negatively on a brand. Retailers offer price discounts to increase and boost their sales, while others use price discounts to attract business customers who are loyal and build long term business relationships.
The basic idea behind price discounts is to give the buyers a value-add (Aaker, 2004). It is seen as a way of rewarding the buyers when done in moderation and at the same time boost short term sales. Long term use of price discount may impact negatively on products value because the quality of the product is directly proportional to its price in the consumers’ minds. Products value is evaluated from the price and product quality. Price discounts are so prevalent due to the competition in the business environment.
Each businesses person does his best to attract new customers and retain the existing ones. Price discounts encourage people to buy today which increases the sales volumes (Kotler, 2006). businesses using price discounts as a sales promotion tool focus on the volumes of sales over other important factors, for instance in selling products that can not be stored, one would rather give price discounts and sell all the products rather than stick to the market price and have some goods go bad, which would mean incurring business losses.
Some price discounts are pegged on volumes such that the discount is only given when one buys goods of a specified volume within a given time. At the end of it, all the price discounts are given to increases sales volume, maintain existing customers and attract new customers and thus outdo the competitors. The ever dynamic consumer demands make price discounts prevalent with each business person trying to attract new customers and maintain old ones (Aaker, 2004). Effectiveness of Price Discounts In Meeting Set Objectives: Price discounts are meant to benefit both the sellers and the buyers; the buyers get more value for their money while the sellers make more sales.
However, price discounts should be used in moderation because long term use of price discounts affects the products brand image. In many situations, consumers relate low price to low quality, especially if the brand name is new or uncommon (Saktishree, 2011). In such cases, price discounts fail to increase sales volume by attracting new customers and instead customers are put off as they become suspicious of the quality of the products.
Frequent use of price discounts raises the probability of having the products or brand being perceived as a lower quality brand. There fore, the objectives of the use of price discounts may not be fully achieved. One may be getting new customers while others and the existing one may choose to buy the competitors brand because of the perception that low prices go with low quality. There may be customers whose purchasing decisions are purely based on the prices charged, and are thus likely to be attracted by low prices (Kotler, 2006).
In the short run, price discount does drive sales for a short period but it impacts negatively on customer loyalty. Customer loyalty comes with customers trusting a product or a brand, which can not happen with a brand that is always giving discounts since customers perceive brand quality to be reflected in its price.
Aaker David, 2004, Brand Portfolio Strategy: Creating Relevance, Differentiation,
Energy, Leverage, and Clarity, New York: Free Press
Aaker David , 1991, Managing Brand Equity, New York: Free Press
Drypen.in, 2010, Market Share Equalization as a Method for Evaluating Brand Equity
Available from: http://drypen.in/branding/market-share-equalization-method-for-evaluating-brand-equity.html
Killian Branding, 2011, The Impact of Discounting on Brand Equity Available from:
Kotler, Philip et al, 2002, Marketing Management, 13th edn. New Jersey: Pearson
Kotler, Philip et al, 2006, Principles of Marketing, 11th edn. New Jersey: Pearson
Marketing Wharton, 2011, Product Pricing and Brand Equity available from:
NetMBA.com, 2010, Brand Equity. Available from:
Saktishree, 2011, Impact of price on brand image Available