The holiday season is often an opportunity for many to make a large percentage of their annual sales. We must therefore have the right strategy and ensure that its execution will be flawless. A vast majority will focus on a pricing strategy. This is not very original, but can still be effective if it is well thought out. Many believe that this strategy is simple because it seems that they only need to lower their prices. Nonetheless, they have to take into consideration competitors, product comparisons, their inventory, timing, consumers’ perceptions, etc.

A strategy based on low prices may be good for some, but deadly to others. If you intend to stay focused on low prices like Wal-Mart, Costco or Maxi, you will have to build up a strong clientele to get considerable volume, and maintain a good relationship with your suppliers. You will also have to get an excellent price from them in order to keep a minimum profit margin.

However, if you don’t choose a position based on low prices but instead decide to reduce your prices drastically to sell, your brand will be affected in the long run. Many consumers will prefer to wait for your discounts and look elsewhere throughout the year. As time goes on, you will have to have a lot of clearance sales to get rid of your stock. People sometimes ask me: « Why do customers go to another place when we offer it for less? » The reason is simply because people are not fooled and believe that you’re being disrespectful by not having a fair price. They say, « I like your products, but why should I pay $150 now when I know the same product will be 25% to 50% less expensive in a month. » They feel cheated.

Always keep in mind that low prices may affect the perception people have of your brand. The discounts may give people the wrong idea about the product. Remember that the leader in a category will be the reference for consumers.

I experienced something similar last weekend. I went to Home Depot to do some shopping and I must admit, I was attracted by a sale. I was faced with a good deal: a box of bits for a drill that, for once, offered everything for concrete, wood, metal, in one package. All this for only $29.99, even though the sign claimed that the actual value was $300. I instinctively thought something was up. Like several other people, I didn’t believe in their promotion. I felt that the product had to be of inferior quality. The difference between the two prices was too great and I didn’t recognize the brand, so, the promotion had no credibility in my opinion.

In conclusion, it is not only essential to define a positioning for your brand and to build its reputation, but also, to analyze every situation before deciding to cut prices.