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Don’t Do It! Discounts can be Death to a Business.

in Cathy's Blog

If you need to create a ‘bump’ in your bottom line for year end or liquidate limited, excess or outdated inventory, sales are a great way to do just that. It can also be an enticement to potential new customers to check out what you have to offer or introduce a new product or service.

While we know that sales can drive short-term business and possibly attract new clients, think carefully before offering a sales discount. Just because everyone else is doing it, should you?

Reasons Not to Offer a Sales Discount

  1. It establishes a lower perceived value for your product or service and sets a precedent.
  2. It can project a lack of confidence in what you offer.
  3. It cuts into your profits

A Lower Perceived Value

If the customer receives a discount – regardless of the reason or season – the perceived value of what you offer decreases. In the 1st Century BC, Publilius Syrus wrote “Something is only worth what someone is willing to pay for it.” So, if the price is lower than your claimed value, the actual value will now become the discounted price to your clients. It sets a precedent and creates an expectation of future discounting that can make future business difficult.

Project a Lack of Confidence

Think about what we just talked about regarding perceived value. When you start discounting, it give the appearance that you don’t really believe that what you have to offer is worth the price attributed to it. Potential AND established customers can (and will!) attribute this to a lack of confidence on your part. It will put two main questions in their head: “Is this as good as I thought if they are willing to cut the price? and “Can I trust this person/company who’s selling it?”

Your Bottom Line

You’re in business to make money. Any time you discount, you cut into your margin and depending on the industry or market you’re in, that margin can be very slim to begin with. It puts pressure on you to make up that shortfall by upping your sales projection or closing more deals at a higher price to compensate. And based on the increased effort to make up for the discount, it could even give you pause and consider cutting corners, reducing service or finding some other way to cut costs.  Don’t be tempted!

And here’s something else to consider, if you attract people that are only concerned about getting something at a discount or a smokin’ deal, unless you’re a liquidation center, these may not be your ideal customers.

Stand out from the crowd by delivering unique value with creative and innovative ideas such as rebates, loyalty programs and timely giveaways, educational or expert tips, charitable contributions, or social events.

To your success ~ Cathy

Now Go Get  Connected!

An award-winning Leader, Entrepreneur and Business Development Consultant, Cathy teaches entrepreneurs how to increase their influence; build their business and stay sane while doing it. She helps you to let go of limiting beliefs to “Stand Up, Stand Out & Step Forward” for business success. Named one of the Top Ten Mentors by StartUp Canada, Cathy is recognized across the country for her expertise on “All Things Small Biz”. She is the Founder of The Connected Woman Association, is a Director on the Board of WeBC (formerly the Women’s Enterprise Centre), author of numerous books and articles specifically her newest book When Women Talk, and is a networking maven. (whew!)

For information on upcoming workshops, business coaching or to engage Cathy as a Keynote speaker at your next event, visit www.cathykuzel.com