An article in the WSJ about retail stores closing on Black Friday included an interesting quote from former Staples executive Mike Edwards:
“…Deeply discounted items also attract a “nonloyal deal-seeker” who would be unlikely to help improve the store’s performance in the long-run, he added.
The idea that customers pay a premium and also remain loyal is fascinating. People value products and services that they have to purchase.
It is tempting to drop prices and hope to make up the balance of volume, but it trains the consumer to look for discounts and always seek out the lowest price. Once they are on the hunt for the lowest price, loyalty goes out the window and margins are eroded to nothing.
Any examples of situations where dropping the price has actually led to less client loyalty?