Why Smart Brands Don’t Discount

 When a quarter is wobbly, there’s always one solution everyone feels comfortable suggesting:

“Let’s do a promo. Drop the price. We’ll hit the numbers that way.”

Short term, it looks like it “works”. The sales graph spikes, dashboards go green, nerves settle.

But if you listen to some of the people who’ve done the most to make brand building evidence-based -
Mark Ritson, Rory Sutherland, Les Binet & Peter Field, Richard Shotton, and Byron Sharp, John Dawes and John Scriven from the Ehrenberg-Bass Institute - you get a very different picture:

Relentless discounting is a brand killer: expensive in the short term and devastating in the long term.

I've pulled their perspectives together so you’ve got one coherent argument you can wheel into the next awkward budget conversation.

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1. Mark Ritson: The seven perils of discounting

When Tesla cut prices across its range, Mark Ritson called it a textbook case of what he termed the “seven perils of discounting”: negative signalling, user disillusionment, questionable top-line impact, promotion addiction, profit erosion, price wars and commodification.   Let's unpick each.

1.1. Discounts signal weakness, not strength

In Ritson’s framing, big discounts shout “we’re under pressure”, especially when they come from a brand that had previously held its price. Slashing price doesn’t just move units; it repositions you in people’s minds, from 'successful brand' to 'desperate discounter.'

1.2. You disillusion your best customers

Price is a promise. When loyal customers discover that what they paid full whack for is suddenly 20% cheaper, they feel punished for backing you early. That “I’ve been conned” feeling is what Ritson calls user disillusionment.  

1.3. The spike is less incremental than it looks

Ritson’s other beef: most promo spikes are heavily subsidised. Once you strip out people who simply brought purchases forward, or who would have bought you anyway, the incremental bit is often tiny - certainly too small to justify the margin you just torched.

Often, all a promotion ends up doing is getting people who would have bought the product anyway to buy it slightly sooner, at a discount.

1.4. Discounts are brutal on profit

Here’s the bit many marketers quietly fudge.

Say:

• Shelf price = £100

• Cost of goods = £70

• Profit = £30 (30% margin)

Cut price by 10%:

• New price = £90

• Cost of goods still £70

• Profit = £20

You now need 50% more volume to make the same total profit (30 ÷ 20). At a 20% discount in this example, you’d need 3× the volume just to stand still. No wonder Ritson describes heavy discounting as “profit-eviscerating”.  

1.5. You risk destroying your equity and commoditising your brand

Ritson’s article highlights one bold price move can spark a category-wide race to the bottom, where nobody wins for long and the whole category gets commodified.  He also references research that suggests that the more premium and stronger the brand is, the more it has to lose from the overuse of price discounting. 

Brand equity is the difference between a brand and its commodity equivalent. Never forget this. Or that discounting literally reduces that difference. With every discount, Tesla will communicate to its customer base: “Don’t buy Tesla because it is the future, because it is green, because of innovation. Buy it not for those brand reasons, buy it because it is cheaper now than it was last week. Buy it for a commodity reason.”

That reason can be persuasive. It certainly works in the short term. But it also leads the brand on a longer-term path away from true brand strength and towards the undifferentiated meat market that is generic, commodity EV vehicles. And the Chinese are all over that end of the market.  MARK RITSON, MARKETING WEEK

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2. Rory Sutherland: Price doesn’t just reflect value – it creates it

Rory Sutherland, vice-chair of Ogilvy and devout behavioural-science expert, looks at discounting through a human lens.

He warns: 

2.1. Price is not just economics

As Rory Sutherland has repeatedly demonstrated, price is a psychological construct, not an economic fact. We don't respond to numbers—we respond to what those numbers mean.

Slash price too readily and you’re not just giving away margin; you’re downgrading the quality signal your brand sends.

As he explains, a cheaper price for better functional might work for the economist but we can interpret it differently - "It's cheaper, so there must be something wrong with it."

2.2. Discounting is “bribing people to buy”

Sutherland’s critique is that cutting retail price is often just bribery at scale: you hand money to everyone, including buyers who were already happy, and in the process you teach them your brand’s real value is the discounted one.

You haven’t reinforced “this is worth it”. You’ve reinforced “this is only worth it when it’s cheap.”

2.3. Discounting 'resets the anchor'

Behavioural experiments on anchoring show that the first number people see becomes a reference point; later prices are judged relative to it, not absolutely.  
Anchoring research shows that the first price you see becomes your reference point. Every price after that gets judged as 'expensive' or 'cheap' relative to that initial number, not based on its actual value.

Run constant 30% off sales, and customers stop seeing your full price as legitimate - it becomes the fake markup that enables your permanent 'discount.

He suggests other techniques to improve margin that might on first glance appear counter-productive,   

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3. Les Binet & Peter Field: Promotions are the “crack cocaine of marketing”

Les Binet & Peter Field have put data behind the danger of promotions.

Across decades of IPA case analysis and econometric work, Binet repeatedly shows that price promotions mostly shift sales around in time and space, rather than genuinely growing profitable demand.

“A big chunk of your promoted sales is actually just subsidising existing sales. You’re giving away discounts to people who would have bought you already... Another chunk of your sales are just time shifted. You’re bringing sales forward. You’re getting extra sales this week at the expense of next week.” LES BINET

3.1. Most promotions are unprofitable

Drawing on Nielsen data in his EffWorks talk, Les Binet revealed an uncomfortable truth: 84% of price promotions are unprofitable.  

His memorable conclusion:

"Most price promotions reduce profitability. They are the crack cocaine of marketing.”

They give you a rush now while eroding profit and pricing power over time.

3.2. Repeated promotions increase price sensitivity

Binet’s work also shows that repeated promotions:

• make buyers more used to buying on deal,

• raise their sensitivity to price changes, and

• reduce your ability to put prices up without losing volume.  

In other words, promotions don’t just sacrifice margin today; they train your market to be more difficult tomorrow.

As Les says in 'The secret to price power' from Kantar's IGNITE series:

"Price promotions are a dangerous and addictive drug at the best of times and right now they are for most businesses sheer madness."  LES BINET

3.3. Brand building has the opposite effect

Using econometric datasets from multiple FMCG brands, Binet shows that brands with higher, sustained advertising spend tend to have lower price elasticity - they lose less volume when they raise prices.  

That’s partly why his work with Peter Field recommends a roughly 60/40 split in favour of long-term brand building over short-term activation (where promotions sit).  

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4. Richard Shotton: Expectancy theory & “bad cholesterol” promotions

Richard Shotton, drawing on behavioural experiments and real-world campaigns, explains why discounting feels effective, yet often quietly harms the brand.

4.1. You get what you (think you) pay for - lower price suggests lower performance

In his Black Friday piece for IAB UK, Shotton retells a study by Baba Shiv, professor of marketing at Stanford University. 

Students were paid to solve puzzles Beforehand, they could buy a caffeinated drink said to improve performance. Half paid full price; half got it cheap.

The group who paid the lower price answered about 30% fewer questions correctly than the full-price group, and the effect replicated across runs.

The implication: lower price didn’t just change perception – it changed performance.

Rory Sutherland demonstrates the inverse is equally true: higher prices can enhance performance. In Alchemy and talks like this one, he discusses research on branded analgesics showing that a higher price creates a placebo effect, literally making the drug more effective."

Shotton uses these sort of stories to illustrate expectancy theory: what we expect from a product shapes what we experience. Lower prices prime people for lower quality, which can become a self-fulfilling prophecy.

So discounting doesn’t just risk damaging brand perceptions - it may literally make your product seem to work less well in people’s minds.

4.2. Treat promotions as “bad cholesterol”

Shotton cites Sir Martin Sorrell’s neat analogy:

• Promotions = “bad cholesterol”: they boost sales but hurt brand health.

• Advertising = “good cholesterol”: it boosts sales while supporting equity and margin. 

Occasional indulgence? Fine. A constant diet of Black Friday-style deals? Dangerous.

4.3. Behavioural pricing can work better than brute discounting

In The Illusion of Choice, Shotton shows that commercial challenges are frequently solved not by discounting, but by reframing how customers perceive value. For instance:

• Use good–better–best line-ups so your target SKU is the “sensible middle” option. 

• Change order effects and anchors (show higher-priced options first).  

• Reframe over time (“from £1 a day”) so prices feel more manageable. 

All of this protects your headline price instead of sabotaging it.

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5. Byron Sharp, John Dawes, John Scriven & the Ehrenberg-Bass Institute data on what price promotions really do

In How Brands Grow, there's a whole chapter devoted to a simple question: what do price promotions actually do to buyer behaviour, sales and profit?

This is well worth a read since it covers a more nuanced perspective covering the different impact it can have on small vs large brands, and the pressures B2C brands can come under from retailers.

The short answer from the evidence is:

• Temporary price cuts do boost sales, quickly and noticeably.

• But they rarely change people’s underlying buying habits.

• And whether they are profitable depends on margins, the size of the discount and how buyers in your category normally respond to price.  

They are not “evil” and they are not a miracle growth lever. They’re a tactical tool with a very particular pattern of effects.

5.1. Price matters, but it isn’t the main growth engine

From earlier chapters in How Brands Grow we learn that brands mainly grow by reaching more buyers, not by squeezing more out of the buyers they already have. Penetration is the big lever. 

Chapter 10 adds an important refinement: price plays a role, but brand leaders are rarely the cheapest option in a category. So being cheap is not how most big brands got big. It follows that price promotions are not the primary engine of brand growth, even if they make sales reports look good in the short term.

5.2. What temporary price cuts actually do

Across categories, the pattern is very consistent:

• A temporary price cut produces a sharp spike in sales while the discount is in place.

• When the price returns to normal, baseline sales drop back to roughly where they were.  

When we look at who is buying during those promotions, we mainly see:

• People who have bought the brand before, plus

• Some light or infrequent buyers of the category who happen to encounter the deal.

What we do not see much evidence for is a wave of genuinely new brand buyers being created who then go on to buy the brand more often in the future. Most people simply slot the offer into their existing repertoire and then drift back to their previous pattern of behaviour.  

So promotions do work in the narrow sense: they lift sales while they run. They quote on average an increase in sales volume of approximately 25% from a 10% price cut. But remember this is volume NOT profitability.  See the Mark Ritson figures above. 

5.3. When can price promotions be profitable?

According to Dawes and Scriven the short-term profitability can be worked out using 3 factors: 

1. The contribution margin of the brand at normal price.

2. How deep the discount is.

3. The price elasticity of the brand (the percentage change in volume from a 1% change in price).

If the extra volume more than compensates for the margin you lose on every unit, the promotion can be profitable in the short term.

But the evidence suggests many promotions do not meet that break-even hurdle, particularly when discounts are deep and margins are already slim.

5.4. Promotions work differently for small vs large brands

Small and large brands don’t always experience promotions in the same way.

• Smaller-share brands often see bigger percentage sales lifts from a given temporary price cut.

• Larger brands tend to have lower elasticities  - the same 10% cut produces a more modest percentage bump.

So:

• For a small brand with reasonable margins, a well-designed promotion can sometimes be a useful way to generate extra trial while the brand is still building mental and physical availability.

• For a large brand, a lot of the promotional volume tends to come from its own existing buyers, so it is more likely to be subsidising business it would have got anyway, which makes profitability harder.

Chapter 10 doesn’t tell small brands to “promote heavily” and big brands never to promote. It says: the underlying patterns are predictable, so bigger and smaller brands should run the numbers carefully and not overestimate what promotions can do for long-term growth.

5.5. The retailer problem: why managers feel forced to discount

One of the reasons managers lean on promotions isn’t the consumer at all it’s the retailer.

In many markets, especially grocery, retailers like price promotions because they make store sales more exciting and visible, expect manufacturers to fund those deals, and may tie price support to shelf space, feature space or catalogue exposure.

That creates external pressure. Even when the manufacturer knows a particular deal is marginal or loss-making, they may feel they must run it to keep the brand on the shelf, maintain good trading relationships, or avoid a competitor taking the slot.

Chapter 10’s advice here is pragmatic: recognise these trade realities, but treat them for what they are – the cost of maintaining distribution and visibility – not as evidence that promotions are a powerful growth strategy in themselves. 

5.6. Price promotions versus advertising

Finally, the chapter compares price promotions with advertising. The contrast is stark: 

• Promotions have immediate, obvious effects on sales, but

  • they reach only those shoppers who are in-store during the offer and happen to notice it;

  • their effects largely disappear when the price returns to normal.

• Advertising has subtler, delayed effects, but

  • it can reach large numbers of light and infrequent buyers;

  • it works by building and refreshing mental availability, which supports buying long after the campaign ends.

For manufacturers whose goal is long-term brand growth, the conclusion from Chapter 10 is that money is usually better spent on building mental and physical availability than on ever-deeper, ever-more-frequent price cuts.

Promotions can have a role – to deliver short-term volume and to satisfy retailer demands – but they are supporting tactics, not the main strategic lever for growth.

5.7. Even “massive” price promotions show no lasting gain

Another Ehrenberg-Bass Insitute paper, Assessing the Impact of a Very Successful Price Promotion on Brand, Category and Competitor Sales, looked at a case with an enormous volume spike. The conclusion? Despite the spectacular uplift during the offer, there was no meaningful long-term positive effect on the brand’s underlying sales once the dust settled. The longer-term negative effect on category volume cancelled out approximately two thirds of the gains of the price promotion to the retailer.

The challenge for marketers, as Sharp points out is that it's easier to prove the short-term impact of price promotions, and harder to demonstrate the payoff of brand building. But that doesn’t mean brand building isn’t where the long-term value is.   

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6. So what should brands do instead of discounting?

If all of these people are telling you to be wary of discounting, what’s the alternative? 

6.2. Treat discounts like antibiotics, not vitamins

From Binet’s “crack cocaine” metaphor to Sorrell and Shotton’s “bad cholesterol” line, the analogy is consistent.

• Use promotions rarely and strategically: genuine stock clearance, trial sampling in a new channel, testing a specific behavior.

• Never let "perma-sale" become your default response when revenue dips.

Use discounts constantly and they stop being a tactic. They become a trap.

6.3. Move money from promos into brand building & availability

Across IPA data, econometrics and Ehrenberg-Bass studies, the pattern is remarkably consistent:

• Advertising and distinctiveness build associations in people's minds and mental availability – people are more likely to notice, recognise and think of you at purchase moments. (Read more on the science of brand-building - simplified - here).

• Distribution, presence and access build physical availability – you’re easy to find and buy.  

• Put together, this makes you less price-sensitive and more able to grow at full price.

That’s where Binet & Field’s 60/40 rule, Sharp’s laws of growth and Ritson’s anti-discounting rants all converge.

6.4. Use behavioural pricing instead of blunt discounts

Read Sutherland and Shotton's books in detail to understand other ways to frame price, such as:

• Use assortment design (good–better–best) so your most profitable SKU is the “obvious” choice.  

• Re-order menus or price lists so anchors work in your favour. 

• Reframe value over time or usage (“per day”, “per cup”, “per wear”). 

None of this requires dropping your base price. It just helps people feel better paying it.

6.5. Change the internal story

You can use this combined thinking to reframe internal debates:

• Ritson gives you the P&L story and the seven perils.  

• Sutherland explains why price is a psychological signal as much as a number.  

• Binet & Field show that most promotions are unprofitable and raise price sensitivity, while brand investment improves price elasticity.

• Shotton demonstrates that low prices can literally make products perform worse in people’s minds and gives alternative pricing techniques to try.

• Sharp & Ehrenberg-Bass bring the laws of growth: brands grow by penetration, price promotions have an immediate but not long-term effect - "they lack reach and usually fail to bring new customers to a brand."

Put it all together and you have a simple, honest argument for any skeptical CFO:

"Yes, we could hit this quarter by discounting. But that teaches customers never to pay us what we're worth - and the data shows it won't drive real growth. Let's fix the value we deliver, the perceived value we communicate and how easy we are to buy, not just hack the price."

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7. TL;DR: Why smart brands don't discount

Across all six thinkers, the pattern is clear:

• Discounting looks more incremental than it actually is. Most “extra” sales are subsidised or time-shifted. 

• It destroys profit disproportionately. Small price cuts require huge volume jumps just to stand still on profit.  

• It weakens your long-term brand strength and hence propensity to grow the business. Price is a quality cue; constant deals teach people your brand is worth less. 

• It increases price sensitivity. Promo-heavy brands end up with customers who buy mostly on deal and resist price rises.  

• It doesn't impact growth. Ehrenberg-Bass finds promotions mostly reward existing buyers; long-term growth still comes from penetration and being easy ton mind and easy to buy. 

If you want durable growth and pricing power, the advice from Ritson, Sutherland, Binet, Field, Shotton and Sharp is remarkably consistent:

Stop fixing bad months with discounts - focus on building the brand. Invest in building distinctiveness and mental and physical availability for long-term brand strength and higher perceived value.

This article just touches on much of the great work from all the practitioners. I highly recommend you dive further into:

Les Binet and Peter Field: The Long and The Short Of It (read the original book and their recent updates a decade on) and Les Binet's IGNITE 2023 talk

Mark Riton's Marketing Week columns

Richard Shotton's books: particularly the Illusion of Choice

Work by the Ehrenberg-Bass Institute. Start with Byron Sharp's How Brands Grow and continue!

Rory Sutherland's book Alchemy - not only insightful but also highly entreating. I devoured it on a plane ride. 

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