152. The 5 Gotchas of Discounting

Discounts can be a powerful tool for businesses, but there are also some perils for the unwary. Here are 5 of them:

Discounting …

  1. Can erode brand value: If you offer discounts too often, customers may start to see your brand as being less valuable. This can make it more difficult to charge full price for your products or services in the future.
  2. Can lead to customer expectations: If you offer discounts too often, customers may start to expect them. This can make it difficult to increase prices in the future, even if your costs go up.
  3. Can create a sense of urgency: When you offer a discount, it creates a sense of urgency for customers to buy. This can lead to impulse purchases, which may not be in the best interests of the customer or the business.
  4. Can cannibalize sales: If you offer a discount on a product, it can cannibalize sales of other products that are not discounted. This can lead to lost revenue for the business.
  5. Can lead to price wars: If your competitors start offering discounts, you may feel pressure to do the same. This can lead to a price war, which can be harmful to all businesses involved.

It’s important to weigh the risks and benefits of discounting before offering a discount. If you do decide to offer a discount, make sure you do it strategically and carefully.

Here are some additional tips to avoid the perils of discounting:

  • Be clear about your goals: When you offer a discount, be clear about your goals. Are you trying to clear inventory, attract new customers, or increase sales during a slow season? Once you know your goals, you can tailor your discount strategy accordingly.
  • Don’t discount too often: If you offer discounts too often, customers will start to expect them and may not be willing to pay full price for your products or services.
  • Don’t discount too much: If you discount too much, you could end up losing money. Make sure you still have a healthy profit margin after offering a discount.
  • Promote your discount strategically: When you promote your discount, be strategic about it. Don’t just blast it out to everyone. Target your promotion to the people who are most likely to be interested in it.
  • Track your results: It’s important to track the results of your discount strategy so that you can see what’s working and what’s not. This will help you fine-tune your strategy over time.

By following these tips, you can minimise the perils of discounting and use discounts effectively to achieve your business goals.

In our next article we look at the effects of charging less for your product or service from a purely mathematical angle; and help you understand just what additional sales you would have to make to stand still financially.

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Posted in Business Development.