Product Management Library of Knowledge
Why You Should Never Discount Your PricesWhy You Should Never Discount Your Prices
Copyright © 2006 Mark Silver
It seems like such an easy fix: "25% off!" "Buy now and I'll reduce the price by $100!" Discounting as a selling tactic seems as natural and easy as all get-out.
Which is why you should never, ever discount.
Discounting is a cancer in business, that eats at your heart, and at the heart of your customers. It is smoke and mirrors.
"Good ol' Wal-Mart. That multi-billion dollar global company, which is the discounter of all discounters. They started with good in their heart. Sam Walton looked around him and saw lots of great things he thought 'the little guy' should have. Why should only the rich have luxuries, now that our great industrial society can produce so much so easily?"
It's a good intention. Unfortunately, this focus on low prices has done incalculable damage to our economies, to our health care, and to the way we use resources. 'Inexpensive' has come to mean 'cheap' which has come to mean 'disposable.'
Which has come to mean huge landfills and global warming, among other things.
Is discounting really that much of a demon? Surely, just taking some money off the top of your prices doesn't mean you're contributing to the environmental, economic and political collapse of the globe?
Not exactly. But let's look at what discounting means, and what it does.
Discounting assumes that:
1. The difference in price between your 'regular' price and the discounted price is what is stopping your customer from buying;
2. It's worth it to acquire a customer whose most important consideration is how cheap your offer is.
Customers hesitate for a number of reasons, which all boil down to: does this offer really work, and will it get me the results that I need?
Discounting your prices means that instead of addressing this question head-on, you are trying to cover up with smoke and mirrors. 'Sure it works... but don't look too closely, and I'll take some money off the top for you.'
You may not be doing this consciously, and certainly not with any ill intent, but all the same this is the set up.
What you are really trying to do: help someone get help sooner rather than later.
Your offer helps someone with a struggle they have. The sooner the right people get your product, the sooner their struggle is over. Understanding that your intention is to get what you offer to the right people sooner, in order to alleviate suffering, well, that's a good intention, isn't it?
Now it's not about smoke and mirrors, but about urgency. One of the ways to help someone purchase sooner rather than later is to offer them a good deal. But not by discounting.
People love a good deal. Is there any way to offer a good deal without discounting?
Keys to the Offer They Can't Refuse
* Understand the difference between a discount and a good deal.
A discount is when you lower the price for the sole purpose of trying to increase sales. It's a strong-arm tactic that often signals desperation- and as such, it actually decreases trust between you and your customer.
There are good reasons to have a lower price. For instance, one company I buy from every month gives me a discount once a year on the anniversary of my first purchase, equivalent to the number of years I've been a customer times 10%. After ten years I'll get that month's purchase free. But that's not a discount in order to get me to buy- it's a thank you and appreciation given to me after a buy. A subtle, but important difference.
* You can announce price rises in advance.
Early-bird and early registration pricing, where you offer a lower price up until a certain date, is not a discount, because you aren't just giving away money, but there is an advantage to you. For me, having classes fill several weeks in advance before the start date means that I have much less to do at the last minute. That's worth charging a lower price. I charge more after the early-registration deadline because it represents more work for me.
This is similar to a pre-launch price. Someone who buys your products before they exist is showing a great deal of trust and faith in you, and you benefit in many ways by having someone purchase ahead of time. That's makes the lower price worth it.
* Cheese, please. Offer bonuses.
You may think bonuses are a cheesy thing to offer, but what if your favorite cafe offered you a free cookie with each fancy coffee drink you bought? Would that help you to choose their cafe over someone else's? If I liked the coffee and the cookie, it would get me nearly every time.
Bonuses work because they show generosity, because they can enhance the experience of the original product, and because you can offer them at very little cost to your business. A good bonus can be a simple thing, as long as it's valuable.
Have fun creating a great offer that's also a good deal for your customers. But don't discount, or you'll be giving away the trust you've been working so hard to build with them.
My very best to you and your business,
About The Author:
|Mark Silver is the author of Unveiling the Heart of Your Business: How Money, Marketing and Sales can Deepen Your Heart, Heal the World, and Still Add to Your Bottom Line. He has helped hundreds of small business owners around the globe succeed in business without losing their hearts. Get three free chapters of the book online: http://www.heartofbusiness.com|
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