One sure sign of a failing brand (or a failing market) is if it starts discounting. Fighting on price is sure fire way to send you into irrelevancy, unless you’re Walmart whose brand is but on low prices.
Elon Musk understands that. The CEO of Tesla sent an email to the entire company to vehemently stop discounting its cars. Musk and other Tesla executives caught wind of some situations in which reps discounted the cars.
In response, Musk said, “There can never – and I mean never – be a discount on a new car coming out of the factory in pristine condition. That is why I always pay full price when I buy a car and the same applies to my family friends, celebrities, no matter how famous or influential.”
Tesla has had a “no negotiation and no discount” policy since it started selling cars a decade ago. And there’s a reason for that. Fair price (or in this case, a luxury price) is important because consumers see the value in the brand and the product. We, as consumers, instinctively believe that you get what you pay for. The best product is not the lowest priced one. For some, always buying the top price means you are getting the best.
Discounting a Tesla is the start of brand failure.
The lowest priced products are rarely the market leaders. Sure, there are some items we will search for the lowest price, but in general we equate price with quality.
If you think about all the brands and markets that are currently struggling, most of them (if not all) began that descent by discounting. It’s an attempt to buy market share, forgoing the difficult work of actually creating a meaningful and preferred brand.
You become mired in a losing proposition once you battle on price. You will forever battle on price. Margins will shrink. And you will have taught target audiences to shop on price.
Think of the major pizza chains. That war is waged on discounting. Few see the difference between Pizza Hut, Domino’s and Papa John’s, except on the daily deals. Musk’s outrage is well placed. He knows that the perceived value of the Tesla cars will drop into the fray if the cars are discounted.