But if you want to be profitable, do the exact opposite. Use consumer research to set the right price, not costs or competitor levels. Expect to lose some consumers on price and enjoy the marginal implications that follow. Spend some money on performance and growth marketing, but make sure at least as much is devoted to brand building. 

And avoid discounts as much as you humanly can. They are the crack cocaine of marketing.

If you discount prices by 20% like BYD you will see a jump in sales. But most of those sales would have come to you anyway. You are just moving them forward. And making the sale at a much more inferior margin. Worst still, you then encounter a dry spell because all those future sales have been sucked forward by last month’s special promotion. So, you run another promotion because that’s how you made sales happen last time. And you get another, slightly smaller, bump of less marginal sales. 

And there it is! Promotional dependence. Which turns to addiction. And then to desperation.

Managers rarely grasp how a relatively minor discount can strangle future performance. Research from Wharton shows price is the single biggest lever of corporate profits—far stronger than sales growth or cost-cutting. A 20% price cut, BYD-style, doesn’t nick 20% from profits. It can eradicate them completely.

And that’s not to mention the impact on the supply chain of sudden lifts and lows in demand. Or the squeeze from retailers who insist on the same promotional terms for their stock. Or the dismay of customers who already paid a higher price for a brand they once trusted. Or the commodifying impact that these discounts have on brand equity and the subsequent price sensitivity that ensues. Or the price war that eventually erupts tarring every competitor with the same dirty promotional brush.

Look at BYD: its enormous $100 billion revenue masks an enterprise in genuine peril. Discount-fueled dependence and under-investment in brand building have left it dangerously exposed. Gross margins are down. Quarterly profits have slumped 30%. Debt-to-asset ratios have stretched past 70%. $45 billion has vanished from its valuation. And worst of all suppliers, employees, customers and even the Government now question the company’s capabilities.

Marketers say plenty about how branding builds a business. And not enough about how discounting knocks it down.