Cheap Prices vs. Constant Discounts: Which Pricing Strategy Will Make or Break Your Business?

By Robert Muehlen | BusinessBear

Pricing is one of the trickiest decisions in business. Should you always sell at a low price to attract budget-conscious customers, or should you keep prices high and use discounts and promotions to drive sales?

Both strategies have pros and cons, and we’ve seen big brands succeed and fail using each one. So, which is better? Let’s dive in.

1. The “Always Cheap” Strategy: Low Prices, High Volume

Some companies focus on offering the lowest prices all the time. They attract customers by being the most affordable option and relying on high sales volume to make a profit.

Companies That Sell Cheap Every Day

- Walmart – Their entire business model is based on “Everyday Low Prices.” They buy in bulk, cut costs everywhere, and pass the savings to customers. It works because they have massive scale.

- Dollar Stores (Dollar Tree, Dollarama, Dollar General) – They keep things simple: cheap prices all the time, small margins, but high customer traffic. Dollarama, a Canadian discount retailer, has thrived with this model, expanding across the country.

- No Frills – A Canadian grocery store that keeps prices low by cutting out frills like fancy store layouts and extra services.

- WestJet (Budget Airline in Canada) – Started as a low-cost airline competing with Air Canada. It focused on keeping operational costs low while offering competitive ticket prices.

Pros of Always Selling Cheap

✔ Consistent pricing – Customers always know what to expect.

✔ Attracts price-sensitive buyers – Budget-conscious shoppers will come back.

✔ Can dominate a market – If done right, low prices can crush competitors.

Cons of Always Selling Cheap

❌ Thin profit margins – You must sell A LOT to make money.

❌ Difficult to maintain – If costs rise (materials, wages, inflation), it’s hard to keep prices low.

❌ Perceived as low quality – Cheap pricing can make customers assume the product isn’t good.

2. The Discount Strategy: Higher Prices with Promotions

Other companies keep prices high but regularly offer discounts, promotions, or coupons to attract buyers. Instead of selling cheap all the time, they create a feeling of “getting a deal.”

Companies That Rely on Discounts & Promotions

- Macy’s & JCPenney – Always running sales and “limited-time” promotions. Their regular

prices are high, but customers rarely pay full price.

- Kohl’s – Uses coupons and discounts (e.g., “30% off if you sign up for emails”) to drive

sales.

- Domino’s Pizza – They rarely sell at full price—almost every order comes with a deal.

- Groupon – Built entirely on discount culture, offering special deals on services and experiences.

- Hudson’s Bay (Canada) – Canada’s largest department store chain, known for its constant sales and discount events. Many customers wait for sales instead of buying at full price.

- Sport Chek (Canada) – One of Canada’s largest sporting goods retailers, offering frequent online discounts and seasonal promotions to encourage purchases.

Pros of Using Discounts & Promotions

✔ Creates excitement – Limited-time deals make customers feel they’re getting a bargain.

✔ Boosts short-term sales – Sales and promotions drive urgency and quick purchases.

✔ Helps clear inventory – Discounts are useful when you need to move excess stock.

Cons of Always Offering Discounts

❌ Trains customers to wait for sales – If people know a discount is coming, they won’t pay full price.

❌ Cheapens the brand – Constant discounts make products feel less valuable.

❌ Not sustainable long-term – Too many promotions can destroy profit margins.

3. What Happens When These Strategies Fail?

Some companies have tried these strategies and failed miserably. Here are some real-world examples:

Failed by Selling Too Cheap

🚨 Sears Canada – For years, Sears tried to compete with Walmart and Costco on price. But they didn’t have Walmart’s supply chain power or Costco’s membership model, so they lost money and eventually collapsed in 2017.

🚨 Target Canada – Target entered the Canadian market in 2013 and tried to position itself as a budget-friendly retailer. But prices weren’t as low as Walmart’s, and customers were disappointed. Within two years, Target Canada shut down all stores in 2015.

🚨 Forever 21 – Fast fashion brand Forever 21 offered cheap clothes but struggled with thin margins and rising costs. They filed for bankruptcy in 2019.

Failed by Overusing Discounts

🚨 JCPenney’s Pricing Disaster – JCPenney was famous for constant sales and coupons. In 2011, they decided to remove discounts and just lower prices permanently. Customers stopped shopping because they missed the excitement of deals. Sales crashed by 25%, and they had to bring back promotions.

🚨 Groupon’s Decline – At first, Groupon was a huge success, offering businesses a way to attract new customers with deep discounts. But many businesses lost money because customers came for the discount but never returned. Groupon’s popularity faded fast.

🚨 Canadian Tire’s Pricing Confusion – Canadian Tire is known for offering constant sales and flyers with discounts. However, many customers find their pricing inconsistent—sometimes a product is on sale at one store but full price at another, leading to frustration and lost trust.

🚨 Hudson’s Bay Struggles – The company relies too heavily on promotions, making it hard for them to profit when sales aren’t running. Customers have learned never to pay full price, which hurts their overall brand value.

4. So, Which Strategy Is Better?

🔹 If you have strong supply chain control (like Walmart), selling cheap can work.

🔹 If you sell premium products, constant discounts can hurt your brand.

🔹 The best businesses find a balance—combining fair pricing with smart promotions.

The Winning Strategy? A Hybrid Approach

The smartest companies use a mix of both strategies:

✅ Apple: Never discounts its products directly but offers occasional promotions through partners.

✅ Costco: Offers low everyday prices but also runs limited-time promotions to create excitement.

✅ Nike & Adidas: Keep regular prices high but use strategic discounts (Black Friday, outlet stores, limited sales).

✅ Lululemon (Canada) – Rarely discounts their products, but offers "We Made Too Much" sales to clear excess inventory without hurting brand value.

Final Thoughts: Pricing Is a Long-Term Strategy

Pricing isn’t just about what you charge—it’s about how customers perceive your brand. Whether you sell cheap or rely on discounts, the key is being intentional with your pricing strategy.

What’s the Best Approach for Your Business?

💡 If you want help finding the right pricing strategy for your business, BusinessBear offers expert consulting to help you grow sustainably. Contact us today!

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