Why brands are ditching discounts to build real growth

How brands get stuck in the promotion trap

The promotion trap is the cycle in which brands repeatedly discount to meet near-term goals, eroding long-term profitability and consumer value in the process. It is not caused by one bad decision, but is instead a symptom of the systemic structure of media planning.

It starts when a team misses a quarterly number and deploys a promotion to recover it. As a result of the promotion, they see volume temporarily spike, then the baseline demand drops post-promotion as customers wait for the next deal. Future targets are then set against the inflated base, requiring even more trade spend to maintain volume, which, in turn, results in a reduction in marketing budgets to fund trade, further accelerating the cycle.

Over time, this trains both consumers and organizations to depend on discounts, substituting short-term volume for durable value creation. As a result, it becomes harder to invest in brand-building and innovation, creating a long-term hit on the brand’s value in profitability, equity and lifetime value.

The impact of the promotion trap

Once a brand falls into the promotion trap, it’s hard to break the cycle. One reason for this is that many retailers rely on outdated metrics, like lift, instead of incremental profit. Lift-based metrics ignore cannibalization, baseline impact and cross-channel effects. Reporting tools also reinforce backward-looking audits instead of forward-looking decisions.

Additionally, the focus on quarterly profits encourages quick wins instead of sustainable value. Teams defend budgets and metrics rather than optimizing enterprise outcomes, so success becomes defined by meeting internal reporting standards rather than external market performance.

With misalignment across the company, it’s impossible to quantify the interaction effects between promotions, media and price. This leads to a lack of understanding of the full financial impact of a discount. Until brands connect every investment dollar across trade, marketing and price, they will remain stuck in a cycle of tactical reactions instead of strategic growth.

Shifting mindsets and rethinking promotional impact

Breaking out of the cycle starts with redefining promotional effectiveness. Instead of measuring lift, brands should look for incremental profit by evaluating promotions’ contribution to total enterprise profit. Leaders must understand when promotions add incremental value rather than when they simply shift the timing of purchases.

Next, brands should integrate planning across marketing, trade and pricing functions. Every decision should be modeled within a unified framework, making it easier to reveal the interaction effects between each spend type. For instance, how does retail media boost ROI? How do pricing decisions change the promotion response curve?

Brands also need to build continuous feedback loops — starting with planning and forecasting before moving to executing and reconciling — and then take those learnings as they restart the process. This ensures they’re able to tighten their forecasting accuracy and improve their next-cycle allocation each time they repeat the process.

Finally, it requires a cultural mindset shift. Brands need to view marketing and trade as an investment portfolio, balancing short-term activation and long-term brand equity. They also need to move from defensive precision — where they have to prove something was right — to decisive confidence — where they can learn and improve fast. KPIs and rewards should encourage collaboration, experimentation and enterprise accountability for profit.

By rebalancing their portfolio, challenging their legacy processes and redefining success, retail brands will be able to drive sustained profit growth rather than short-lived spikes.

Discounting is not a growth strategy. It is a symptom of disjointed planning, short-term pressure and poor measurement. The way out is not to stop promoting altogether, but to promote intelligently by understanding true incremental profit, coordinating across functions and learning continuously.

Real growth happens when organizations treat every dollar — in trade, marketing or media — as a unified investment designed to build both this quarter’s results and next year’s profitability.

Sponsored by Keen Decision Systems