Hello! Smythson Sends Me A Discount Code! What The...!?
Issue 1! Woo!
Hey!
Welcome to my new experiment in newsletter fun: Above Average Intelligence.
I’m going to start coming into your inbox once a week with one big story, filled with ideas and analysis that can help your business.
This is my way of sharing some of the insights I’ve been developing working on and studying corporate strategy and pandemic marketing trends.
If you dig this newsletter, share it with folks.
Let’s do this!
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As I start the first one of these notes, I think it is important for me to lay down a few philosophical basics to begin our relationship with. Then I’m going to cover why Smythson’s 20% discount emails are so destructive to an iconic brand.
First, let me being with some basic ideas that guide my strategy and marketing thinking. Let’s call them Dave’s top 10 of strategy and marketing:
All modern strategy is about power, gaining it, or losing it.
Most corporate strategy is now marketing strategy in disguise.
Most “strategy” isn’t really a strategy, but a checklist or wishlist.
Marketing is everything and your brand is the accumulation of all of that everything.
Strategy is about opportunities, creating them, and capturing them.
Pricing is the MVP moment of marketing and I judge folks by how well they price.
Discounts are for dummies!
The backbone of good marketing and good strategy is research.
Change is constant.
The opposite of a good idea can still be a good idea. And, the opposite of a bad idea can also be a bad idea.
As a bonus, I’ll add a number 11: Always get the Barolo!
So, Smythson.
Smythson is a luxury brand that sells the best notebooks and folders in the world. I’ve been using a folder for years!
Besides Mont Blanc, I can’t think of another brand that just sings luxury around writing and stationery.
That’s why I was alarmed when I saw this coupon hit my inbox on Monday morning, telling me to “Take20” off my order.
Why
Why are my knickers in a twist here?
I’ll give you three reasons, not just one:
Discounts destroy your brand and are the fastest road to the commoditization of your brand.
This looks like a bad strategy because the world’s wealthy actually got richer during the pandemic which would seem like Smythson’s target market.
On the power scale, this decreases Smythson’s power.
Let’s take a quick look at each of these:
This ad decreases Smythson’s power:
The Power Framework is a simple, but effective framework to analyze a business’s strategy.
You look at three areas:
Competition
Customers
Suppliers
What you are looking for is whether or not a strategy improves your power in these areas.
In looking at Smythson’s ad, you see the following things play out:
Smythson’s customer base is wealthy and uber-wealthy. Part of the power of Smythson’s brand is at the expense of buying a quality leather good, preferably in London, but the cost is part of the story that you tell yourself. Discounting gives away some of Smythson’s power.
Smythson’s competition is tough to know because customers don’t make their decisions in a linear line, but for sake of argument comparable products can be bought at Mont Blanc or you can also have customer-crafted folios. And on the paper side of things, you have a lot of competition. But in my mind, I think of Mont Blanc and Smythson together. In offering this discount, Smythson loses power.
Suppliers can go several ways here because you could consider the retail partners that work with Smythson as suppliers, but let’s just look at the people that supply the raw materials. Knowing that Smythson might offer a discount if these purveyors of raw materials have a lot of demand, they are likely to hold back the best stuff for someone that might not discount because they probably won’t want to be in partnership with a discount brand either. For Smythson, this is, at best, a tie. At worse, another loss of power.
A discount is the sign of a bad strategy:
I’m a bit of a marketing geek and I won’t bore you early on with that.
But let’s say that when you’ve gotten to the point of discounting your products, there have been multiple failures along the strategic path you’ve taken.
Let me show you just a few of them:
It could mean that no one took the time to do new research in the market. Like I mentioned above, the uber-wealthy have seen their wealth grow a lot during the pandemic.
Discounting one of the most luxurious brands in the world is a sign that the segmentation, targeting, and positioning have not been done well. Because if you have one of the premier brands in the world, positioning your product as a discounter isn’t a wise decision.
Finally, the solution to overpricing your products or needing to update your pricing is to reprice your stock. Knowing Smythson, they do a lot of seasonal things which gives them several points in the year to reprice without the need to discount.
On the whole, discounting shows that you haven’t pulled your strategy together effectively.
And, for the discounting apologists, let me share with you three ways that discount thinking hurts your business:
Research has shown that when you discount, you open the door in your customer’s brain that says, “discount brand” for around 7 years…no matter what.
Price is the most important moment in marketing because it is where you capture the value you have created for your market. For every 1% in the price you can increase, you grow your profits by 10%+.
On the other side, for every 1% discount, you cost your business about 40% in lost profit.
Don’t discount!
It is a sign that you either have a bad strategy or no strategy.
Discounts destroy your brand:
Professor Mark Ritson says that the fastest way to commoditize a brand is by discounting.
I’ve been able to travel the world before the pandemic on the strength of one idea: “Discounts are for dummies!”
And, in this case, Smythson acts as an accomplice in harming its brand.
A quick brand primer:
Your brand is the accumulation of all the encounters a person has with your brand over time. Good and bad. Just know that the good stuff adds up slowly and the bad stuff can destroy you quickly.
This is why you have to pay attention to every touchpoint in your customer journey. Because every touchpoint counts.
What is interesting about studying touchpoints is that the small things typically count a lot more than the big ones.
Like this email.
The person in charge of putting this together is likely thinking something along the lines of, “It is just one email and we will get a nice little boost from it.”
How do I know this?
Because I’ve sat in the meetings or had the conversations with the CMOs or Marketing Managers that have signed off on these things.
It is always, “Just one email” or “Just this once”. And, it is always paired with, “We will get a nice little revenue boost.”
It is not what you make, but what you keep.
And, once you start pushing the discount button, you never stop.
Discounts undermine you in so many ways. You keep taking one little action until you turn around and your brand is a shell of its former self.
So don’t discount because it is never just a discount.
It is opening a door to pushing the discount button regularly. It is a touchpoint or many touchpoints that tell people you don’t believe in the value of your product. And, it is often a broken promise from your brand to your market.
Takeaways here:
Think about strategy through the lens of power. Are you gaining power through your strategy or not?
Discounts are a sign of strategy gone wrong. Follow the process of strategy development: research, STP, set the strategy. That will help you price better.
Don’t discount. Discounts are for dummies and they will destroy your brand.
Let me know what you thought of this first edition of Above Average Intelligence. And, if you dig it, share it with a friend or colleague.
See you next week.
Dave