It’s rather nice to get feedback that my web content has proved useful. The article, 7 Compelling Reasons Not To Discount, has been on my main site for a while and I was told the other day that it helped win a debate within a company.
It is often too easy to reduce prices but very difficult to increase prices.
Reassuringly expensive – perhaps that should be an objective.
Here is the full article.
7 Compelling Reasons Not To Discount by Jane Francis
If you are selling a service and you only have your personal time to sell, one hundred hours is one hundred hours—and the number of discounts you give to customers can make the difference between a profitable year, or not.
Unfortunately, discounting as a business practice is so entrenched that I probably don’t need to help you recreate the arguments that justify it.
The dictionary describes the effect well: ‘to deduct from the amount, cost; to disregard; to make less effective by anticipation.’
Before you succumb to the temptation to win new business by offering a discount take a moment to consider these seven problems associated with discounting:
Reason not to discount 1
Negotiations over discounts focus attention on price – as if that were all that matters. If your only competitive advantage is price, you are in trouble, because the price can always be matched.
Reason not to discount 2
Discounting starts price wars. The company that usually wins is the one with the biggest balance sheet—the one who can afford to hold out the longest.
Reason not to discount 3
Discounting can affect the customer perception of your service. The less they pay, quite likely the less they will value it.
Reason not to discount 4
Discounting will affect your profit margins. Consider what would happen if all your competitors met your discounted price—do you think your customer is going to accept any less quality?
Reason not to discount 5
Discounting may affect the quality of your service. Yet, if you compromise the quality of what you sell, you risk disappointing customers and you may lose repeat business, and lose credibility or gain a bad reputation, or end up spending time fixing complaints. One way or another today’s discounts could rob you of future business, and profits.
Reason not to discount 6
Discounting may lead to ‘stockpiling’ where customers purchase more than they need while the price is cheap. This will affect demand and potential profits in the future.
Reason not to discount 7
Habitual discounting can become psychologically disempowering. A reduced price can be a short-sighted ‘quick fix’ that reduces business growth in the long run. Before you discount, stop and think: Is this the only way to give value?
Be mindful when you’re offering a discount. Why are you doing it? Is it an investment, and will it net you a greater financial return in the future? Or is it something you do all the time, a thinly disguised (yet noble!) excuse for not charging your worth?
Are you offering a discount as the ‘lazy way out’ – instead of making the effort to explain or demonstrate your value? One of the basic rules of negotiating is that if you are going to offer a discount, you offer a different product or service. Perhaps negotiate different terms, or a shorter guarantee, or longer lead times. Challenge your customer’s proposition for a discount with: “If you want a better price, give me a better order.”
About the Author
Jane Francis is the author of ‘Price Yourself Right: A guide to charging what you are worth’ [ISBN 0-595-38601-6] which is available at Barnes & Noble (US), WH Smith (UK) and at www.amazon.com. You can read more at her blog: www.priceyourselfright.blogspot.com
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