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You are here: Home / Marketing and Business Development / Why Discounting Your Prices Doesn’t Build Your Business

Why Discounting Your Prices Doesn’t Build Your Business

November 8, 2009 by Sue Painter Leave a Comment

One of the things I hear from solo professionals pretty often is that the way to make more money is to discount their prices.  I've railed against this for years, and told stories about talented entrepreneurs who discounted themselves right out of business.  If you are one to think that discounting does your biz good, think again and take these points to heart.

  • Highly successful businesses don't compete on price alone.  They are smart enough to know that being the cheapest isn't a strong USP (unique selling proposition).  Instead, they want you to spend money with them because their service is better, their designers more creative, their merchandise higher quality, they are more convenient, or their knowledge and expertise gives you a value far and above what you pay.
  • You don't want your customers buying from you only because you are the cheapest deal around.   Here is one big reason why – cheap customers are not loyal customers.  They buy only on price, so as soon as Sally down the street offers a floral arrangement for even one dollar cheaper, off they go.  You need repeat, loyal customers.  Constantly having to find new customers AND having to find them only because you are the cheapest deal around will flat wear you out.  You will “churn” customers rather than create a willing customer base for your business.  You will work much harder for every dollar you earn, and you will earn less dollars (because your prices are cheaper).
  • When you discount constantly, you get customers trained to never pay full price.  I wrote a blog post about this some time back that illustrates this.  Lately, Talbot's has gotten into the bad habit of constantly offering sales.  I never pay full price there and I never will – I know that I can always wait it out and get a nice discount and maybe even free shipping.  Too bad for Talbot's that they have trained me and a dozen other people I know to never pay full price.  That also gets me to thinking that if they can discount THAT much, their prices might be highly inflated to begin with – not something Talbot's needs me to be thinking!
  • It is a strange phenomena but it's true that people will hunt down the cheapest price, gleefully pay it, and then not much value what they bought.  Now what you've got on your hands is a customer you discounted to, and the thanks you get in return is that they really don't even value what they got from you.  That doesn't make them want to come back to you, does it?
  • If you have set your prices fairly (that means, you are making a good profit but you're not gouging, either) then discounting may mean you don't cover your costs.  Service business are especially bad about getting themselves into this trap, because they are not purchasing product to resale.  Instead, they are selling their time and expertise.  I've seen hair dressers and massage therapists deep discount 30% only to find they are working like dogs and can't pay their rent and utilities at the end of the month.  Have they gotten clients?  Yep.  Are they going to stay in business?  Nope.  They have, in essence, worked themselves right out of business.

If you want to offer a special deal in order to grow your business don't do it by discounting.  Instead, ADD a small product or service without charge.  This does TWO things – it ADDS value rather than lessens values.  And, it shows your customers a new product or service that they might not have known you have – something they may decide they can't live without the next time they are in.

Bottom line – in most cases, discounting doesn't serve you in building your business.  Solo professionals and small business owners are not the same as super-big-box stores who can spend millions advertising and churn new customers constantly.  You want to cherish your customers, treat them well, offer fair value, and give true benefits in your products and services.  This will build a solid business with loyal, repeat customers who value you and what you offer.

(c) Sue Painter


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Filed Under: Marketing and Business Development Tagged With: Business Planning, Client Attraction Mindset

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