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Transcript
- Lucas: So I want to start with a confession. I have a drawer full of branded T-shirts I bought because they were on sale, and I have worn exactly zero of them in public. Luna: That is the most honest marketing take I've heard this week. But also — you're the problem, right? The sale made you buy something you didn't actually want. Lucas: Exactly. And that is the trap that discounting sets for both the customer and the brand. Today I want to make the case that promotional codes — the 10 percent off, the 'use code SUMMER20' — they might be quietly destroying your brand equity. Luna: Bold claim for a Tuesday. Give me the evidence. Lucas: Let's start with a number. A 2024 study in the Journal of Marketing looked at 1,200 online retailers over three years. They found that brands that run a discount promotion more than once per quarter see a 15 to 20 percent decline in their willingness to pay metric within 12 months. Luna: So customers just learn to wait for the sale. Lucas: Exactly. You train your audience like a lab rat. Ring the bell — or in this case, send the promo code email — and they learn that full price is never the real price. The reference price in their head drops. Luna: And once that reference price drops, it's really hard to bring it back up. Lucas: Almost impossible. There's a famous case from the early 2000s — JCPenney. They ran so many coupons and sales that customers literally would not buy anything unless it was marked down at least 40 percent. When the CEO tried to switch to everyday low pricing, it was a disaster. Revenue crashed. Luna: Because the brand had no pricing power left. They'd trained three generations of shoppers to wait for the coupon. Lucas: Right. And the interesting thing is, some brands have figured out how to avoid this entirely. Patagonia is the poster child. They almost never discount. Even during Black Friday, they don't do sitewide sales. Their famous 'Don't Buy This Jacket' campaign was actually an anti-consumption message. Luna: And their customers are fiercely loyal. I think the average Patagonia customer has a much higher lifetime value than the average North Face customer, for example. Lucas: There's data to support that. A 2025 analysis by the loyalty platform Yotpo found that brands that discount less than 10 percent of their transactions have customer lifetime values that are 2.3 times higher than brands that discount more than 30 percent of transactions. Luna: But isn't that partly because they attract a wealthier customer? It's not just the discount policy. Lucas: That's a fair point. But even controlling for income, the pattern holds. Stanford marketing professor Itamar Simonson ran a study where he showed people the same sweater at full price from a brand that never discounts versus a brand that frequently discounts. People rated the sweater from the no-discount brand as higher quality — even though it was the exact same sweater. Luna: So the discount actually signals inferiority. 'This thing is on sale because nobody wanted it at the original price.' Lucas: Exactly. And that's the psychological flip. Discounts erode perceived quality. And once that perception is gone, you can't just advertise your way back. Luna: Okay, so what's the alternative? Because I run a small business and I can't just say 'no discounts ever' — my customers expect them. Lucas: That is the real question. And there are a few strategies that work better. First: value-based pricing instead of discount-based pricing. Instead of marking something down, add a higher-tier version with more features or better materials. Trader Joe's does this brilliantly — they don't do coupons, they don't do loyalty cards, they just keep prices low and consistent. Luna: But Trader Joe's has a cult following. What about a brand that isn't a cult? Lucas: Everlane. They built their entire brand around 'radical transparency' — they show you the cost breakdown of every item. They run very few sales. Instead, they do limited-edition drops and 'Choose What You Pay' events where the discount is framed as a choice, not a fire sale. Luna: That's smart because it preserves the reference price. The customer knows the 'real' price is the full price, and they're getting a temporary exception. Lucas: Right. Another approach is to shift from price discounts to value-add discounts. Instead of 20 percent off, offer free shipping, a free gift, or early access to a new collection. The discount feels like a reward rather than a price cut. Luna: And that protects the perceived value of the product itself. Lucas: Exactly. There's also the subscription model. Brands like Dollar Shave Club and Harry's use low ongoing prices instead of flash sales. The consistency builds trust. Luna: But let's be real — some industries are just discount-heavy. Fashion, especially fast fashion, runs on sales. Can a brand like Zara ever stop discounting? Lucas: Probably not entirely. But Zara actually does something smart: they keep inventory tight. They produce small batches, sell them at full price for a few weeks, then move on. There's no 'end of season' blowout because they've already sold through. The scarcity creates urgency without a coupon. Luna: So the lesson is: if you have to discount, make it rare and make it feel special. Not a predictable calendar event. Lucas: Exactly. Your customers should never be able to say 'I'll wait until the 20 percent off email comes.' That means limiting promotions to once or twice a year, and framing them as events — like a birthday sale or a product launch celebration. Luna: And what about loyalty programs? Do those count as discounts? Lucas: They can, but they're better than blanket discounts because they reward behaviour. A points-based program where customers earn rewards over time reinforces purchase habits without teaching them to wait for a sale. The discount is a surprise, not an expectation. Luna: I like that. So a surprise discount when they hit a threshold is fine — it's the predictable, advertised 30 percent off that's dangerous. Lucas: Exactly. And here's a practical framework I call the Discount Audit. Every quarter, look at your last three months of promotions. Ask: Did this promotion bring in new customers, or just reward existing ones who would have bought anyway? Did it increase average order value, or just lower revenue per transaction? And most importantly — did it change how customers behave after the promotion? If they wait for the next one, you have a problem. Luna: I think a lot of small businesses would benefit from just asking those three questions before they hit send on that promo code email. Lucas: And the answer is often uncomfortable. Because the data shows that the most profitable customers are the ones who never use a discount code. They buy at full price, they buy more frequently, and they're more likely to recommend the brand. Luna: So the promo code is basically a tax you pay on your best customers to attract your worst ones. Lucas: That's a blunt way to put it, but yes. And it's not just about revenue — it's about brand equity. Every time you slap a 20 percent off banner on your homepage, you're telling the world your product wasn't worth the original price. And that message sticks. Luna: Honestly, if these marketing conversations have sparked something you've actually used — maybe a pricing tweak or a messaging shift — I think it's worth mentioning that listener support is what keeps this show ad-free and genuinely independent. Lucas: Yeah, it's a small thing but it makes a real difference. If today's episode was worth a coffee to you, the link is buy me a coffee dot com slash fexingo. No pressure, just appreciation. Luna: And honestly, knowing that people find this stuff useful is what keeps us digging into these topics. Lucas: So back to the discounting trap. The bottom line is: if you're a brand leader, ask yourself whether your pricing strategy is building long-term equity or just buying short-term volume. The brands that win — Patagonia, Trader Joe's, Everlane — they treat pricing as a brand decision, not a sales tactic. Luna: And they have the margins to show for it. Lucas: Exactly. Next episode, I want to talk about something I think a lot of marketers are getting wrong right now: the obsession with viral content. Luna: Oh, that's going to be a fun one. I have some strong opinions on that. Lucas: Save them for next week. For now, go audit your discounts.