Small Business Challenges: Discounting Will Devalue Your Brand

I love reading articles about people who have built amazing companies and brands. Usually, there is a person or several people who have a vision and are not willing to sacrifice what they believe in. Many small business challenges exist, and temptations to discounting shouldn’t be taken lightly.  In WSJ today (The magazine from the Wall Street Journal), it was facscinating to read how Patrizio Bertelli, chief executive of Prada, works with his suppliers and is protective of his brand. After some yelling in a discussion with Neiman Marcus recently, he describes his behavior as “a passionate exchange between two people who are proud and intense about their business.” So, he is personally in there fighting for displays at the stores who carry his products. I sat up in my chair when he tells how he is still angry that in 2008, in response to the economy, “Neiman Marcus, Saks and others discounted $1500 handbags and $750 footwear by as much as 70% causing European luxury firms to worry that their customers would never pay top dollar again.” I have just spent a week with small business owners talking about the risks of discounting and Bertelli’s comments completely illustrate this point. Once his Prada products are offered at a lower price, it does devalue the brand. Now, when people look at a handbag that was valued at $1500, but their friend purchased it for $500, in the mind of the consumer, that is a $500 bag. Think about it and tell me if you agree…

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I’m Sarah Petty

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