To discount or not to discount, that is the question!
With Black Friday, Cyber Monday, and all the other discount days behind us I figured this subject is a good one to discuss.
Coming from a small business point of view my personal thoughts are to only offer discounts on stock that is needed to be moved, or for days in your diary that need to be filled. I’m also a firm believer that offering discounts too frequently also devalues your brand. Now before you flick away from here, let me explain!
What drives a discount?
We’ve all been there, that place in business where we think that discounting is the optimal choice for attracting more customers to your brand. Meantime, from a client’s point of view, their main considerations are price, quality and alignment with their needs, if they think they’ve found a bargain then that’s an even bigger bonus!
It could also be the case where you see many other businesses on social media offering discounts and you don’t want to miss out. This is quite a conundrum; you don’t want to feel like an opportunity is being missed but on the other hand you don’t want to out on potential profit!
Advertising deals can provide you with more exposure, but is it for the right reason? Are you attracting more customers in a way that aligns with long term viability and which aligns with the value proposition of your business. It may be that price is all that matters to your customers but often this is not the only factor.
Profit vs Loss
Short term sales vs longer term profitability. Sale numbers alone do not equate to profitability. By this I mean I doubt your business will be able to sustain a good profit margin after giving away hefty discounts unless you are discounting products that you need to shift or need to fill available days in your calendar. This is amplified if you fall into the trap of discounting too frequently.
We all see the giants like Amazon, Boots and clothing stores etc offering big discounts which is good for us of course, but they can quantify the markdown on cost. Their stock levels are huge, their buying power is massive and yes, it drives more traffic for them. They are going to make a profit on identifying slow moving stock, they probably paid a lot less for them. In many cases these events also reinforce other aspects of their brand value, take for example Amazon and their next or even same day delivery.
Discounting too often, as a small business has a huge effect on your brand. Like I said earlier, you don’t want to be that business that people know you are always discounting. Your clients will always be looking for a lower price. It cheapens your brand and desensitizes your clients to your brands value. Do not un-consciously train you clients that your discounted offerings are actually the norm, Black Friday turns into pre-Christmas Sales turns into post-Christmas Sales turns into Easter sales turns into summer sales.
You’ll never see the luxury brands such as Bentley or Breitling offering discounts. They don’t need to; their customers want that brand. They are committed to paying the luxury price tag, they are aware that it’s luxury. That brand will not be offering discounts, ever!
Think of it like this, you have worked hard for your brand, getting it noticed and to bring in profit to make your business viable. Don’t sell it short. Stand proud of your prices, you’ve done the research, you know who your competitors are and what they are doing. Don’t copy other businesses. Stand out on your own merit, know that your prices are set right. There is a real risk here that you participate in a race to the bottom.
Instead of discounts
Instead of offering discounts too often, why not offer extra value, feel good offerings. For instance, add free shipping or even add a gift that compliments the product or service you’ve provided.
Everyone likes to feel special. When your client opens the box of goodies they’ve purchased, they find a little gift you’ve sent them; make sure you mark it ‘with compliments‘ (link for ideas). Not only will they remember how they feel, but your clients will remember being treated well and come back to your business. They will remember that special feeling of thoughtfulness. They won’t expect the same treatment all the time, but your customers will know they are valued.
As a small business, don’t fall foul of copying the big sellers out there. Don’t offer discounts too often in a bid to get noticed. Make your business noticeable by offering unrivalled, great customer service. Let your customers know they are important to you, make them feel special. Your customers are pivotal to your brand, without them your business is dead.
Of course, offering a discount for a specific purpose is helpful but don’t do it too often. If you are going to do it, do it for the right reasons and don’t make it a regular occurrence.
My first thoughts, as a service business are, am I offering a discount to benefit my business, do I have available time in my diary that I’d like to fill. Do I have dead time that could earn profit? How do I offer the discount, is it a blanket offering on all services or am I targeting specific dates. Time is my tool to profit, when the time passes, that opportunity is lost forever.
Discounting can be a useful tool if used correctly. Don’t forget to spread news of the offer far and wide through all your social channels, your website and of course talk to people about it. Use every available opportunity to talk about your business.
Stand proud of your brand, know what your brand is about and shout about it.
Just my thoughts!