Mark Ritson sets out 10 reasons brands should never cut prices

Mark Ritson, founder of the MiniMBA, argues that price promotions are always a mistake and praises Procter & Gamble for refusing to use them to win or rent market share.

He calls his position absolute, with no qualifications about “remaining disciplined on promotional intensity”, and says few things give him more satisfaction than rejecting discounting outright. If readers will not take his word for it, he suggests they listen to P&G in Cincinnati instead.

P&G’s stance

Ritson points to P&G’s fourth-quarter earnings call last week, where chief financial officer Andre Schulten faced a question about how heated promotional activity had become. Schulten said the volume sold on promotion in Europe was up about five points in the latest data, as the market moves back towards pre-Covid deal levels with some extra World Cup activity. The day before, rival Unilever, which is an official World Cup sponsor and has 50,000 creators working for it, had happily reported stepping up its own promotions.

Schulten rejected promotion as a way of building a business or acquiring users “in any way, shape or form.” At P&G its only approved role is to drive trial.

He also said P&G is deliberately taking longer to regain market share because it will not buy share with promotions, whose gains disappear when spending stops. Ritson notes that P&G’s price mix has been positive in 20 of the past 21 years. “While the category discounts, P&G prices,” he writes.

Ritson says marketers routinely raise exceptions: clearing old stock, retailers demanding a 25% deal for an end-of-aisle display, matching a competitor’s half-price offer, new variants, Black Friday, trial, B2B and SaaS. He says he hears these caveats constantly, usually introduced with “I totally understand where you’re coming from on price promotions…”, and that even a company wholly opposed to discounting will find deals creeping into its value chain somewhere. His answer is that there are 10 separate arguments against discounting, each persuasive alone. Together, he says, they show that the most foolish thing in marketing is also standard practice, as Black Friday demonstrates annually through lost margin, stockpiling and the slump that follows.

The 10 reasons

• The maths: with typical consumer margins, a 20% price cut requires roughly double the volume to earn the same profit, which nobody achieves. Price has been known for 30 years to be the biggest lever on profit, so discounting is the surest way to destroy it.

• Reference prices: shoppers who see a product at 30% off often enough treat that as its real price, and the RRP becomes a fiction. Lowered reference prices rarely recover, and retailer loyalty pricing has made the true regular price harder still to identify.

• Subsidised regulars: much of the promotional spike comes from existing buyers who would have purchased anyway and are now stockpiling, so brands pull sales forward rather than creating new ones.

• The hangover: demand falls the following quarter because customers were paid to buy early. “The spike was never growth. It was a loan,” Ritson writes.

• Addiction: someone notes that the last promotion worked “wonders” and proposes another. Share falls whenever deals stop, so they never do, and the brand becomes dependent.

• Alienating loyalists: the people a brand should least want to upset are its loyal customers. Those who paid full price a month earlier see their purchase, and the brand’s margin, undermined by a 30% off badge. “They love your brand. They are not idiots,” Ritson writes.

• Signalling weakness: retailers and distributors in other markets see the discount, refuse full-price terms and demand their own deals.

• Price wars: competitors are no smarter, Ritson says. They match the deal or go further into the red, consumers come to expect discounts, brands become generic, retailers take control and nobody wins.

• Undermining advertising: brands spend millions telling consumers they are special and worth it, with the confidence that heavy spending itself signals, then a promotion says they are like everyone else, got their price wrong and are struggling. Ritson says consumers are already alert to price and pack-size manipulation, as the backlash against “maximiniflation” shows, and frequent discounts give them more reason to doubt the link between price and value.

• Confirming internal doubts: each discount reinforces colleagues’ suspicion that positioning, advertising and talk of “premium” and “top of funnel” are a waste, and that sales would rise if marketing were cut and the savings passed to customers. Cutting prices again, he says, looks like marketing agreeing with them.

The exceptions he concedes

Ritson admits that, privately, he might accept one or two occasions when a discount makes sense. Some consumer goods companies argue that well-targeted promotions can help shoppers during economic pressure when paired with innovation, new packaging and clearer messages about value. But he warns that most marketers would treat that nuance as permission to do lasting damage, and says he tends to meet them after the harm is done, when they realise too late.

He says the question he hears most is how to justify long-term brand building internally. A close second is how to repair a brand and category after nine years of heavy price promotion.

Value without discounts

Ritson defines value as what the customer receives divided by what they pay. Discounting cuts the denominator, which anyone can do. Companies such as P&G work on the numerator through better product, packaging, communication and availability, at the same price.

His example is Tide. P&G has given its original liquid detergent its largest upgrade in more than 20 years, substantially improving the product while keeping the price unchanged. The previously declining brand moved into high-single-digit growth without deals or coupons.

The wider approach, he says, is to build the brand over years so the premium is accepted before shoppers reach the shelf, use real innovation to justify and raise prices, and resist promotions entirely. “Because once you start, you’re usually finished.”