Is Cheap the New Rule?

One of my coworkers had brought in coupons for a favorite fast food place and we started extolling the virtues of couponing. In our conversation, she mentioned that when not wanting to cook for the family dinner, her husband now asks, “Where do we have coupons to use?”


While we laughed, as one of our market research analysts, she commented about the changing of consumer behavior. “Will consumers go back to paying full price when the economy recovers?”


The danger in discounting and couponing has been noted by retailers placing offers through Groupon and other discounting online services. Less than 25% actually get new business from customers who redeem the special offers and even less had attracted full price business afterwards.


From Knowledge @ Wharton e-newsletter, experts at Wharton and elsewhere are conflicted about consumer spending habits impacted by the recessionary period we have found ourselves in for the last three years.  “Cheap” has gone from being a stigma to being a “badge of honor.”


According to the article, “No Longer Simply ‘Chic,’ Cheap Is Now a Badge of Honor., “While some argue that consumers will pick up their spending as the good times return, others say Americans have permanently embraced a cheapskate philosophy, and are unlikely to go back to their spendthrift ways anytime soon.


As a marketer, it has always been difficult to want to lead with special offers or discounts for fear of generating only loss-leader sales without more profitable repeat sales.  In financial services, the loss leader has been a low rate or waived costs. However, to attract the attention of consumers today, it requires an offer that will move them to action.


Here are two things to consider about using discounts with the new “Cheapskate” consumer:

  • The discount on a product or service is a not only for “first-timers”, but is also a “treat” for long-term customers/members. There is little worse than a long-time customer/member feeling that they are not getting the best deal.
  • Your discounted product/service can gain a lot of volume to make it somewhat profitable, especially when targeting new customers/members.  Loss leaders are meant to gain an interaction with your product/service with a new customer but may gain discount-only customers that drain away profits.


Do you have other things for all of us to consider in this new “Cheap” marketplace?

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