6 Reasons Why Promotion Can Kill Young Businesses

“Hey,let’s put up a festive sale promotion today to get more sale!”

“If we announce 40% discounts for all our products next week, customers will surely RUSH to buy!”

”Promotion is the key to get more business!”

Unfortunately, promotion is not realistically effective today, this is because everyone is doing it. Just walk along any shopping mall and count how many shops are putting up their promotion.

In the real world, everyone is doing the same thing. And in fact, promotion may kill young businesses slowly in the long run.

You can always choose not to follow the masses

You can always choose not to follow the masses

And here are the 6 reasons why:

1) Loss of Premium Price

Promotion gives consumers the impression that the business’ products and services are very low in prices. Even after the promotion is over, consumers will have the feeling that the particular business does not command a premium for their products.

loss prices

Especially for new businesses without strong financial muscles, it will be very difficult for them to sell their products and services to consumers at premium prices thereafter.

2)  Becoming Commodities

Since every big or small businesses are using promotion as a common strategy to drive sales, it does not make them remarkable at all; it only makes their products looks more like commodities.

As what the bestselling marketing author, Seth Godin mentioned in his book, Purple Cow,

“the leader is the leader because he did something remarkable.”

Therefore by doing something different from what the masses are doing, you can give your brand a chance to become remarkable.

Credits: owned.com

Credits: owned.com

3) Risk Brand Sustainability

Promotion risks brand sustainability. It has a short lived period. The most important question to ask oneself is, “what happens next after the promotion?” Will it make consumers want to buy your products and services more even if there is no more promotion? Or will it be the opposite?

As most businesses do not have a clear direction on how to protect their brand sustainability, they will come up with promotion after promotion. Therefore, risking their brand sustainability further.

Head towards your business goals

Head towards your business goals

4) Vulnerable to Stronger Competitors

Promotion makes young businesses more vulnerable to the bigger competitors. It affects the profit margin. It only makes small businesses earn just enough to make ends meet.

Bigger competitors, on the other hand, can sustain longer on promotion even with marginal profit margin; thereby giving them a chance to defeat the smaller competitors.

Credits: The Rag Blog

Credits: The Rag Blog

Hence for small businesses to win the big boys, giving out promotion is never a good strategy. It will not make them remarkable. So, small businesses need to come up with very creative and outstanding business strategies to make them stand out from the rest.

5) Extends Brand Building Time

The clock is ticking

As profit margin and consumer perception of the business weakens, it will be very hard for the business to build the brand into a premium brand.

This is because brand building needs time. And a business with consistent and unnecessary promotional strategies, will extend their brand building time unintentionally. Hence, for young businesses, the best strategies is therefore to stay firm on their prices and the value of their products and services.

6) Never-ending Price Wars

price war

Today you slash down your products’ prices by 40%. Tomorrow your competitors cut their prices down by 50%. And then you counter with 70% discount with free gift. And then more competitors join in with 85% offers and so on.

Somehow in one way or another, promotion has created an unnecessary price war in the industry. Companies that slashed down their prices with promotion will be the ones that suffered the most in the end.

A remarkable company will never follow what the masses are doing. They have a strong following of customers that will buy their products and services at a comfortable price they set, even if the competitors are still slashing down their prices.

In a nutshell,

Promotion is no longer an effective tool to bring up any business in today’s age. The most important thing for businesses today is to find out what are the effective ways that can sustain their brands without solely depending on promotional strategies.

Stop following the masses; create your own footsteps!

Stop following the masses; create your own footsteps!

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4 Responses to 6 Reasons Why Promotion Can Kill Young Businesses

  1. Robin January 21, 2014 at 7:58 am #

    Thanks for the article. Point #4 seems to use young businesses and small businesses interchangeably. Is that the intent? Does a 40-year-old, small business experience the same vulnerability as a young business does, i.e. compared to big business?

  2. Leigh Hopkinson January 21, 2014 at 8:03 am #

    Hey guys, that was useful, thank you. Think I kind of knew this “stuff” in the back of my mind, but very good to have this input and support. Can feel a bit lonely with this new business as do not really have a team at the moment,mainly volunteer workers who get free classes- so thanks.

    Leigh
    North Beds Arts
    NBA mission to serve local and wider community through art and design provision for pleasure,career advancement, and grade improvement at school.

  3. Tim January 21, 2014 at 7:23 pm #

    Sorry but promotion is good, no matter what your size. That’s why I own a promotional products business and the industry continues to grow even in a down economy. BUT I do agree that cutting prices has the effects you state. Years ago when I was looking at a business the distributor told those selling “his” product to NEVER put it ‘On Sale’ because the ‘Sale Price’ becomes the new selling price.

  4. Hines January 30, 2014 at 11:57 pm #

    Promotions do many times effects the company in an adverse manner because many offering discounts results in loss to company. People may think that company is providing low quality items a low prices so promotion should be done carefully.