Discount pricing is a form of promotional pricing strategy that involves lowering the actual cost of a product or service in order to increase traffic, move inventory, and drive sales. People are attracted to lower prices because they enjoy the feeling of getting a good deal.
A good example is of a company that values price discounting to beat its competitors that are given by Muhtar Kent, the Coca Cola president. He has been able to make Coca-Cola products very popular all over the world. He believes that that the three thumb rules need to be applied. These are discounting briefly, discounting credibly, and discounting relatively.
You cannot discount your way to success; bargain pricing is too damaging to your bottom line and is not appropriate for new items. Furthermore, when you discount a product, its perceived worth suffers. Customers would not stick around if they don’t believe your product is valuable.
Price discounting has been used widely and as Dawes (2004) argues, the customers have become desperate and this has undermined brand equity although it is expected to emphasize it. This has forced the Coca-Cola president to engage in discounting briefly in which price discounting is done for only a short period of time thus not lowering the value of the brand.