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B2C Approaches 99

Manage discounting

As many businesses find themselves in contracting econo-
mies, they decide to discount heavily to maintain revenue
levels. This must always be done in concert with the realiza-
tion that brand damage is possible. If the business decides
that the brand can sustain the impact of heavy discounting,
this can be a valid marketing approach – but be careful.

Plan pricing strategy scenarios in advance of transitions
and stick to them. Economic cycles take the full range of
depth and duration. They are difficult to predict at best.
Many businesses find themselves in reactionary modes and
making business decisions that are based on fear, which
many times lead to long-term damage. It is best to create
pricing strategy scenarios before an economy’s transition
either up or down. This is helpful in taking the “emotion”
out of the moment.

In 2008, the Christmas season demonstrated many exam-
ples of retail businesses taking a wide range of pricing
strategies. For some, it was all about protecting margins
and the brand. For others, it was pure volume. For the
high-end retailer Abercrombie and Fitch, the CEO was
adamant that they would not discount during the holiday
season to both protect margins and ultimately their brand
of being an exclusive retailer. One could walk through
different shopping malls and see the proliferation of sale
layered on sale advertisements. The Abercrombie and
Fitch’s storefront was conspicuously absent of any sale sign
– even during the competitive Christmas season. This was
clearly a statement to their customers that they still repre-
sent the highest quality and most exclusive clothing choice
and their pricing would still reflect that pricing power.
Abercrombie and Fitch volumes did go down as much as
60% but their margins held. One of their closest competi-
tors, J. Crew, another retailer who targets the higher-end