Discounting inappropriately during the life cycle of a product erodes value. This is evident in the marketing efforts of garden centers and is prevalent throughout the supply chain of our industry. It is caused primarily by a lack of understanding and knowledge of the required disciplines to protect and prolong the value of our products.

Never in the history of time could you buy so many of our products for so little.

Wholesale prices have experienced extended stagflation and deflation when adjusted for the slow but steady effect of inflation in our economy and increased discounting as we compete with a growing number of retail outlets for our products. Man nor company can live by improving operating efficiency alone. Somewhere along the line we must compete on the value we add to our products with our marketing messages rather than discounting prices to drive more volume, which is not working.

Many will say you just can’t stop your competitors from discounting. I am counting on a few of you to ignore the naysayers and call others to action.

My role is to initiate the conversation and your role is get involved in a dialogue that makes it much more useful. The comments that you and other readers can post to this article on the Internet enrich the information and extend its reach to bring others on board with our mission.

Now On With My Part

You are probably expecting me to say one of two things about what discounts do: Discounts drive business. Discounts destroy brand equity.

Both of these statements are true. Let’s try to understand why.

I’m going to address this from the perspective of the specialty retailer (whether part of a chain or stand-alone independent). If I were to discuss it from the perspective of a low-price retailer (whether part of a chain or a stand-alone independent) we would be having a different conversation. Do not be improperly influenced by what discount mass-retailers do in their advertising and in the media. They need to know, understand and play their game as low-price retailers while we need to know, understand and play our game as specialty retailers.

Driving Business With Discounts

Discounts can drive business in terms of customer transactions, unit volume, total revenue or gross margin dollars. Discounts appeal primarily to the inherent cost-consciousness of the typical American consumer, but they also call attention to the existence of a product by the nature of their exposure to consumers. When an item is being discounted there is rarely any attempt to build the value of the product. Discounted products are generally displayed in a large quantity, with a larger price or discount sign than regularly priced products. The price of a product is the first indicator of its value, and a discounted price lowers the perception of value to the consumer. If the product is discounted, the value is also discounted.

Demographics Of Discounting

There is a question about the demographics of consumers shopping for garden-related products. Some folks argue our industry needs business from all consumer economic levels and others believe all levels can be served by the independent garden center. I see that as a competitive issue but relevant when it comes to building, protecting and prolonging the value of product brands. Low-price brands such as The Home Depot, Lowe’s and Walmart have to play that angle hard. The rest of us have to respect their position, but play ours.

The Thrill Of The Deal

Several years ago I had an economically desperate client run a “Yard Sale for Gardeners” to drive traffic. They spent more on advertising for that late August campaign than the entire previous year. One regular customer came for the fifth day of the three-day sale that was extended due to its success. This was not an ordinary customer. She was “good for” $20,000 to $30,000 of changes and improvements to their home landscape each year to the company’s landscape division. Mrs. So and So went to the clearance area and filled a cart with stuff that would soon be donated to a rummage sale. She proceeded again to the greenhouse, which was stocked with enough color to fill yet another cart. The owner worked to ensure every selling opportunity was taken advantage of. On the last day of the sale he also rang out each customer at his own register. When he helped his best customer to her car he encountered her two-seater sports car with the top down. He said, “Virginia, you didn’t tell me you drove the Mercedes. This stuff isn’t going to fit! I’ll put it in my pickup over here and follow you home. This was followed by an emphatic “NO” from the customer. “I’m taking this thing in this afternoon to get it detailed. Fill ‘er up,” she said.

Do you argue with your best customer? After filling the passenger floorboard and seat full, he said, “There is no way the rest of this will fit. Please, can I just put it in my pickup and follow you?” She cut him off and insisted as she slid behind the wheel of the car, “Shut up and hand me that hanging basket.” After stuffing a few more goodies into the car she drove out of the parking lot – with that hanging basket in her lap. True story.

The moral of the story is this: Even rich people need a deal.

And if you don’t fill their thrill of a deal someone else will. This explains why the marketing plan of high-end retailers like Nordstrom’s occasionally include a sale.

Destroying Brand Equity

A constant and consistent barrage of sales, discounts, rebates and other such messages does nothing to build or reinforce the value of products while doing everything necessary to destroy the value the customer may have already perceived.

Take a stack of all your marketing messages from this spring and go through them and highlight every sale or discount message in yellow, and every value-building message that is not accompanied by a discounted price in green. This exercise will clarify where you stand as well as give you a pretty good idea of where you are headed if you don’t change your perspective on what discounts do to formulate the value your customers receive from doing business with you.

The first step to take is to gain the understanding that discounting has a high cost. Next we need to understand how to add value through our marketing messages. Making the change is not easy, but it is possible and necessary. We’ll explore how to add value in your marketing messages in my next article in the September issue of Today’s Garden Center.