Discounts are a powerful tool in the world of retail, often used to attract customers and boost sales. However, the strategy of offering discounts can be a double-edged sword, as seen in the case of Apple and JCPenney.
Apple, known for its premium products, only offers discounts once or twice a year. By creating a sense of exclusivity around these discounts, Apple ensures that customers are more likely to make full-price purchases rather than wait for a sale. This strategy has proven successful for Apple, as it maintains its brand image and profitability.
On the other hand, when Ron Johnson, the former CEO of JCPenney, attempted to eliminate discounts and implement an “everyday low pricing” scheme, the results were disastrous. Customers were accustomed to JCPenney’s discount-driven model, and the sudden change alienated them. Johnson’s tenure at JCPenney was marked by poor performance and ultimately led to his ouster.
In contrast, Kohl’s has been successful in retaining customers by maintaining its popular Kohl’s Cash Discount program. This program allows customers to earn rewards during promotional periods, which can then be redeemed for future purchases. The program has become ingrained in popular culture and has been a key factor in driving repeat visits to Kohl’s stores.
Despite the success of Kohl’s Cash, some experts believe that Kohl’s has larger issues to address in its business. While the loyalty program has helped prevent a significant decline in sales, it is not a substitute for a strong overall value proposition. Kohl’s has lost over 1.4 million customers in recent years, indicating that there are underlying issues that need to be addressed beyond the loyalty program.
In conclusion, discounts can be a powerful tool in retail, but they must be implemented carefully to avoid alienating customers or damaging a brand’s image. Apple’s selective use of discounts and Kohl’s successful loyalty program demonstrate the importance of understanding customer behavior and preferences when implementing pricing strategies in the retail industry.
