Hello again.
A little while ago, Philip* contacted me for some business consulting advice. He was pretty upset: his electrical supply business had followed the lead of many of their competitors with a Valentine’s special (“spark-y” puns and all). His sales figures had soared in February, but less than a month later, Philip was struggling again. What was he to do?
As business owners, we are often tempted to offer discounts to drive growth – especially during lean months. More people in the door means more sales means more money, right? Not so fast.
As Nancy Reagan famously declared, “Just say no!”. Discounting is an ineffective strategy because it offers too little - if any - return on your investment.
Less is less
Discounts require you to take a loss – end of story. To give a discount, something has to get cut:
the quality of your materials
the level of service you provide, or
the speed with which you deliver orders.
This strategy may result in a rapid surge of sales. But do bear in mind that a customer who receives a sub-par product may be happy with the discount, until buyer's remorse sets in, and he or she lets other potential buyers know that your product did not meet their needs.
In other words, another element that has been cut is your reputation.
Perceived value
Promoting your sales with a discount or special offer at best implies that your product or service has no better feature to distinguish it from rival products or services. At worst, discounting hints that you are selling an inferior offering. Customer confidence is a crucial building block of relationships, along with the assurance they get from buying something of quality. Discounts crush these two brand essentials, and you certainly have a better reason to persuade customers to choose your product.
The wrong crowd
Discounts draw discount customers who many never actually pay full price - an unprofitable customer. Or they pay, but they keep squeezing you for more. Have you ever discounted and ended up with a client that was a real pain? Tell us about it on Facebook
Stop being lazy
Discounting is a lazy strategy to help boost income. Instead, put in the time and effort to create an offer specific for a target market. Inspire your customers to stay and buy.
Don’t show weakness
Discounting is largely a sign of distress such as trouble converting prospects to customers, or cash flow is in jeopardy. This has your competitor wringing their hands in glee as they lower prices in kind, further weakening your chances of growing your business or steadying revenues.
Bottom line
Quick question: do you run the numbers before you run a discount promotion? Is the discount based on a figure you pull out the top of your head?
Price is the weakest of all attributes to use when trying to sell your products. Consumers will pay for what they value. Focus on revealing the why of your product instead of the how much.
Still not convinced? Click HERE to download a complimentary discount formula. Or even better, contact me for an initial, obligation-free consultation.
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*Names changed to protect the naive.