Why Discounting Hurts Your Cultural Organization And What To Do Instead (Fast Fact Video)

Discounts don’t do what organizations think that they do…

Check out this week’s KYOB Fast Facts video to get the two-minute low-down on discounts verse promotions (Hint: promotions are a much better idea – and, yes, they are extremely different). 

Discounting Is Bad Business For Cultural Organizations

It’s true: “Getting discounts” is often cited as the top reason why many people engage with an organization’s social media channels. So it seems logical that if you want to bump your number of fans and followers, offering discounts is a surefire way to go. And it works – if your sole measure of success is chasing these types of meaningless metrics. But, before you go crazy with discount offers on social networks just to get your “likes” up, here’s another thing that’s true: Offering discounts – especially via public social media channels – cultivates a “market addiction” that often has long-term, negative consequences on the health of your organization. In many ways, offering discounts creates a vicious cycle whereby a visitor-serving organization realizes and ever-diminishing return on the value visitation.

A discount is when an organization offers free or reduced admission to broad, undefined audiences for no clearly identifiable reason. Offering discounts devalues your brand and often makes it look like your organization’s admission isn’t priced correctly in the first place. This is generally true for discounts delivered via all channels, but discounts breed a special type of pervasive problem when they are offered on the digital platforms. When an organization provides discounts, it often results in five not-so-awesome outcomes:

 

1) You verify that your communication channels are sources for discounts and, thus, encourage your community to expect these discounts

Posting a discount to attract more followers on a social media channel (or to get people to engage with a social media competition, etc.) will very likely result in a bump in likes and engagement. But know that in doing this, you are verifying that your social media channel is a source for discounts.

Discounting attracts low-level engagers who are more likely to be following your channels for a discount than they are for any reason related to your mission. It is far better for your brand and bottom line to have 100 fans who share and interact with your content to create meaningful relationships than it is to have 1,000 fans who simply like you for a discount.

I can hear the rumbling now: Some of you are thinking, “But we’ve used discounts to attract more likes and it worked” (i.e. it generated more likes on social media). That’s not surprising at all. Over time, however, these low-level engagers may stop following you or simply disengage if you do not continue to offer discounts. That is, after all, the reason why they followed you in the first place…and you have shown them that, yes, indeed, you will post discounts on social media.

Generally, these people are not actual evangelists – and cultivating real evangelists to build a strong online community is the whole point of social media. You want folks who actually care about what you’re doing.

 

2) Your community will wait for discounts before deciding to visit, thereby altering visitation cycles

Data indicate that offering coupons on social media channels – even once – causes people to postpone their visits or wait until you offer another discount before visiting you again. Worse yet, the new discount generally needs to be perceived as a “better” offer (i.e. an even greater discount) to motivate a new visit. This observation is consistent with many aspects of discount pricing psychology, whereby a stable discount is perceptually worth “less” over time. In other words, the same 20% discount that motivated your market to visit last month will likely have a diminishing impact when re-deployed. Next time, to achieve the same outcome, your organization may have to offer a 35% discount…and then a 50% discount, etc. You see where I’m going with this…

 

3) You are not necessarily capturing new visitation with discounts

In fact, data from IMPACTS suggests that many of the folks using your discount were likely to visit anyway…and pay full price! This is a classic example of an ill-advised discounting strategy “leaving money on the table.”

“But visitation increased when we offered a discount!” you say. But did it really? The average person in the United States visits a cultural center once every 19 months. When an organization offers a discount, it is rarely actually attracting larger volume of visitation to the organization. Instead, the organization is often simply accelerating its audience’s re-visitation cycle on a one-time basis. This sounds great…until the organization realizes the significant downside to this happening: Your audience just visited your organization without paying the full price that they were actually willing to pay and  likely won’t visit your organization again for (on average) another 19 months. 

Think of it this way: A visitor coming to your organization in May may be (on average) likely visit to again the following December (i.e. in 19 months). Let’s say that you offer them a discount that motivates them to visit in October instead of December. Now, you’ve linked their intentions to visit to a discount offer and decoupled it from what should be their primary motivation – your content and mission! And, by doing so, you’ve created an environment where content as a motivator has become secondary to “the deal.” In other words, you will have moved your market from their regular visitation cycle to a visitation cycle dependent on an ever-increasing discount. Can your organization afford to keep motivating visitation in this way?

A note: Different organizations generally have different visitation cycles. 19 months is a US average. Regardless of how many months make up your organization’s visitation cycle, discounting disrupts that cycle and partners it with a perceived “deal.”

 

4) Discounts actually decrease the likelihood of re-vistation

What of the idea that discounts get people to try your organization and become regular attendees? It’s largely a myth. In fact, the steeper discount, the less likely folks are to re-visit within one year. This is classic pricing psychology at play: People value what they pay for. If your organization’s admission price is set at an optimal point, then your organization has largely removed price as a barrier to engagement, and discounting actually does the exact opposite of what many organizations think that it’s doing. That “discounted trial” that some organizations believe that they are offering falls flat because the folks who profile as being likely attendees are able and willing to pay the full price. Your organization is demonstrating that it devalues its brand and, in turn, audiences devalue your brand.

Hey. You started it.

IMPACTS-Revisitation and discounts

 

5) Your organization becomes addicted to discounting

Organizations sometimes confuse the response (i.e. a visit) to the stimuli (i.e. a discount) with efficacy. Once a discount has been offered to motivate a visit, we regularly witness the market “holding out” for another discount before visiting again. And what are organizations doing while the market waits for this new discount? Often times the answer is that they are panicking.

If you run an organization that offers discounts, you’ve probably spent some time in this uncomfortable space – we observe the market’s behavior (or, in this case, their lack of behavior), and begin to get anxious because attendance numbers are down. What’s a quick fix to ease the pain of low visitation? Another discount! So we offer this discount…and, in the process, reward the market for holding out for the discount to begin with. That is the insidious thing about many discounting strategies: They actually train your audience to withhold their regular engagement, and then reward them for their constraint. We feed their addiction and, in turn, we become addicted ourselves to the short-term remedy that is “an offer they can’t refuse.”

Like most addictive – but ultimately deleterious – activities, there is no denying that discounts “work” – provided that your sole measure of the effectiveness of a discount is its ability to generate a short-term spike in visitation or increase low-level social media “likes.” But, once the intoxicating high of a crowded gallery or filled theater has passed, very often all that we’re left with is a nasty hangover.

 

Promotions are a better strategy

“But aren’t promotions pretty much the same thing as discounts?” No. They aren’t. Many organizations fail to stop and consider the differences between discounts and promotions and, specifically, the different effects that each has on the perceptions of the cultural organization offering the opportunity. If your organization confuses the two, then you’ll likely end up paying the price. Literally.

Promotions offer a targeted benefit for certain audiences for an identifiable reason. The biggest difference between promotions and discounts may be how they are each perceived. As previously mentioned, discounts offer free or reduced admission to a broad, undefined audience for no apparent reason. Promotions celebrate your community. Examples of promotions may include reduced admission for mothers on Mother’s Day, a pricing special to celebrate a new program, or a reduced admission day for local audiences. Promotions demonstrate why an organization is offering free or reduced pricing in the communication of the promotion. That reason is usually something that celebrates an organization’s mission or an organization’s audience, and it is made clear that it is something special.

While some may learn the differentiation between these two approaches and consider it to be a framing of communication, it’s actually a reflection of an organization’s culture. Whether an organization’s go-to strategy includes either promotions or discounts demonstrates a great deal about the organization and the thoughtfulness of its engagement approach, as well as the value that it places on its reputation. In the end, one approach is more about your organization’s flailing attempts to hit specific attendance numbers at the expense of its brand and mission, and the other is more about your organization’s relationship with target audiences and communities.

Promotions make people say, “Wow, I feel valued by this organization!” Discounts make people say, “Hey, I got in cheap.” The approach that respects both the organization and its community beats out the short-sighted discount strategy when it comes to increasing long-term visitation.

 

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Posted on by Colleen Dilenschneider in Community Engagement, Digital Connectivity, Fast Facts Video, Financial Solvency, IMPACTS Data, Myth Busting, Nonprofit Marketing Leave a comment

About the author

Colleen Dilenschneider

MPA. Chief Market Engagement Officer at IMPACTS Research & Development. Nonprofit marketer, Generation Y museum, zoo & aquarium writer/speaker, web engagement geek, data nerd, marathoner, nomad, herbivore

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