The Real Price of Blanket Discounts: Protecting Profit and Brand Value

Forward-thinking brands and retailers are shifting from reactive markdowns to lifecycle pricing, a strategy that ties discounts to product performance, forecasted demand and local market dynamics.

Instead of treating every SKU equally, lifecycle pricing enables:

• SKU-level precision informed by demand forecasts.
• Localized decisions by market, channel, or even store cluster.
• Hybrid automation combines AI-generated proposals with leadership’s strategic oversight, ensuring scalability and alignment with business priorities.
• Automation enables scalability, ensuring even small markets gain guidance without heavy manual input.

Lifecycle pricing provides the advantage of maximizing profit by marking down the right products, in the right amount, at exactly the right time.

Luxury and premium brands face a particularly delicate balancing act. Too much discounting erodes exclusivity, while avoiding markdowns entirely risks costly overstocks.

Lifecycle pricing bridges this gap. By aligning markdowns with lifecycle stage, local demand and competitive dynamics, retailers remain aspirational while still protecting margins. Scarcity and equity are preserved, while promotions are strategic rather than desperate.

Markdowns aren’t just math. They’re psychology. A 20% cut on a $19.99 item may look neat in a spreadsheet, but to consumers, it rarely feels meaningful.

True markdown management takes into account how shoppers respond to numbers by using the idea of price elasticity demand, which means how buying behavior changes when prices go up or down. The right strategy adapts based on the original price, the category and the threshold so that each discount connects with shoppers at the register.

With AI-driven recommendations from Centric Pricing & Inventory™ brands manage pricing at scale while leadership maintains full oversight. Well executed markdowns align with consumer expectations, protect brand identity and drive profitability.

The urgency for change is clear. According to IHL Group, inventory distortion, the combined cost of overstocks and out-of-stocks, costs retailers $1.7 trillion annually worldwide. Outdated markdown practices only make this problem worse by adding unnecessary discounts on top of existing inefficiencies.

At the same time, consumers are more discerning than ever. They notice when markdowns are strategic versus scattershot. Once conditioned to expect heavy discounts, it’s extremely difficult to rebuild pricing integrity.

Retailers like GUESS that embrace lifecycle pricing report tangible benefits:

• Higher margins by avoiding unnecessary discounts.
• Faster ROI, sometimes within a single season.
• Stronger brand equity through selective, brand-consistent promotions.
• Operational efficiency by replacing spreadsheets with structured workspaces.
• Confidence and scalability come together as automation streamlines small markets and leadership stays in control.

A slight margin improvement across thousands of SKUs can unlock millions in additional profit.

Transitioning to lifecycle pricing doesn’t have to be overwhelming. Retailers can start with a phased approach:

1. Audit markdown history to identify profit leakage and brand perception risks.
2. Define rules that set boundaries by category, channel or price point.
3. Introduce demand forecasting to guide decisions with data.
4. Test and refine markdown strategies in select markets or product groups.
5. Scale with automation, layering AI to manage complexity while retaining strategic oversight.

This framework builds internal confidence and demonstrates ROI before rolling out broader change.