Pricing panel: 'Discounting is the devil's work'

Discounting is a controversial subject, with one panellist on MCA’s pricing panel even calling it “the devil’s business”.

To be fair, Hippo Inns co-founder Ian Edward was talking about the type of random, poorly thought out discounting which can “destroy a business”.

It’s a hotly debated subject practice, and one Charlie McVeigh, the recently departed founder of Draft House, which was acquired by Brewdog for c£13m earlier this year, was supportive of – given the right approach.

McVeigh told MCA’s Pub Conference that well-executed, clear and consistent discounting promotions can drive sales during traditionally quiet times of the week,

He said: “Discounting can be an event in and of itself. By building promotions over a period of time, making customers aware of it, after a while the penny drops. You tell them everyday, and they start coming in every week.

“Making it fun, making it clear and making it consistent over a period of time can really drive sales.”

The idea of incremental growth through targeted discounting was one shared by Rohan Pradhan, chief operating officer at Deliveroo.

“Discounting if done in the right fashion is something that can be incredibly attractive to a board range of customers”, he said.

“At Deliveroo we don’t price products on behalf of operators, what we can do is build tools to target specific customers to encourage them to spend on use cases or occasions where they otherwise would not have considered.

“This is purely incremental, so even if it’s a 20% discount, it is 20% on a ticket which you otherwise wouldn’t have had.

“We see huge uplift in the volumes when discounting.”

While Edward agreed with the premise of discounting being best executed with a targeted strategy, he was less measured in his words.

“Discounting is the devil’s business”, he said. “If you go down the discounting route randomly without thinking it through, you will destroy your business.

“If you discount you have to be targeted about how you do it, and have a long term strategy.”

Edward held up the likes of Pizza Pilgrims, which is a non-executive director of, for managing to stick to a long-held strategy of selling pizza and beer for £10.

While McVeigh’s approach at wet-led Draft House largely focussed on food, pricing was always a sensitive issue around beer, and McVeigh said if anything he should have been less reticent about raising beer prices.

He said: “I remember the £4 a pint barrier being bridged. We were so nervous about going over it. Each new barer now comes round a lot more quickly.

“The problem is a lot of people think a pint of beer costs x, and you can end up in the papers being accused of selling beer for £8 a pint, which is not a good place to be.

He added: “One of the mistakes I made was supressing the price of Gamma Ray, which for our customers was like catnip, they couldn’t; get it anywhere because not enough of it was being brewed.

“I was determined to keep it below £6, but finally had a showdown with my managers, who said we could sell this for £6.50. I said Ok and we had no complaints, everyone was just delighted we still had the beer.

“If customers come in and are excited about a product, and there’s a scarcity element, then go for it.”

So what are the dark arts when it comes to discounting.

As data company, Pradhan said Delliveroo was able to track users’ lifetime spend, and target discounts more specifically.

But he said the crux of matter was the psychology around pricing.

“How do you merchandise the product to people?” he said. “If you don’t communicate to users they don’t care.

“If you offer 20% off on a £10 burger or £2 off, there’s a clear difference in what people choose, despite the discount being identical.”

Be prepared to be wrong about consumers, Pradhan added.

“The customers always surprise you withy their behaviour in ways you wouldn’t expect. Having a hypothesis is good, but a rigid point of view is not.

“Keep an open mind, and be set up for measuring.”