Every entrepreneur and business owner fall into this trap- sales are slow and times are getting tough. So, the first thing they feel they should do is discount their way out of business. They offer everything at half a price, hoping to get some cash locally. On a surface, it may seem like a logical thing to do. You can get a quick cash infusion so you can pay your bills. But, the long-term danger is that this tactic has proved to be more harmful to your business in the long run.
Why Discounting Is A Bad Idea
Discounting is like a highly addictive drug. Once you start doing it, you get addicted and so do your customers. If you keep doing it, that’s when things turn bad- really bad. Once your customers get used to expecting discounts, they won’t buy without it. Notwithstanding diminishment of value, discounting is like a drug and you should never give your customers a taste of it.
The harm is that when you discount your offerings, you’re also devaluing your business. Instead of offering a discount, you can offer bonus upsell with purchase. It could be an additional or complimentary product or a gift with purchase. By doing that, you’re adding more value to your service offering and providing a reason to do marketing campaign around that particular service. Your customer will feel that they got a lot more for their money and you have not devalued your offering.
Discounting erodes the value of your brand in the eyes of your customers. People are no longer willing to pay as much money for the same product when they get something at a discount. Is that how you want people to treat your products and services? Now, the big question is that if you can’t discount your way out of business, then what can you do? Well, instead of lowering your price, you should always add value.
Benefits VS. Costs
Benefits are what the customers perceive as an advantage for them. The value they associate to it is strongly linked to the way they experience the benefits in their daily lives. Costs are what the customers perceive as loss for them and the value they award to it is strongly related to what they lose and how valuable that is to them.
Creating Customer Value
Costs and benefits are not only expressed in terms of money, but also in time, attention, reputation, privacy, status, comfort, ease of mind, excitement, entertainment, and effort. Customer value increases when either benefits increase and/or costs decrease. When both benefits increase or decrease equally, there is no effect on the customer value.
Let’s say, for example, that you’re an electrician and you want to sell your services. Instead of discounting your rate to fill up clients, you can offer one free safety audit with purchase and installation of a new electricity meter. What’s the key here? When you add a bonus to your product or service, put a time limit on it. The time limit will help entice people to act now so they won’t miss out on the additional value. So, don’t discount, add value. It’s the right thing to do for your business for long-term growth.
I’d love to hear what you think. Do you tend to put something on sale in order to get some cash flow going? Share your response in the comments section, or if you have a question, we would be happy to answer.