Discounts suck!

Why discounts are good and bad for your business

You may wonder how I could say that discounts suck. Well, discounts aren’t bad on one hand, but on the other hand it could ruin your business if done wrong. Furthermore, your clients will become addicted to you giving discounts.

Everyone loves discounts. Sometimes we even wait to get a discount for something we really want to have. Yet, we wait for the discount because we don’t see the regular price as adequate. I do this sometimes myself. I wait until I could get a good price, that feels reasonable to me. Too bad for the business selling the item.

When are discounts good for your business?

Discounts could be a good thing if you bind them to purchase volume or loyalty of your customers. If you have high-volume buyers, it’s a great thing for them to receive discounts. And for your business it’s great too, because you know you will have a certain amount of sales coming in. However, you could not take it for granted.

And loyal customers gifted with special discounts will buy again from your business. And it does not make a difference if you sell to end customers or business-to-business.

When do discounts suck for your business?

If you give discounts for no reason, your customers may get addicted to these discounts. They may even wait longer to buy, just to check if you are going to increase your discounts even further. That could start a death spiral for your business. Why? If you haven’t priced in your discounts from the start, you are losing money on every sale. This in turn burns your profits and your cash-flow.

History has more than enough proof that selling on price could be dangerous. Just imagine a big competitor of yours is going to do the same. You both increase discounts to customers again and again. Who do you think will go out of business first? Yes, the one with the lower capital resources.

Which impact do discounts have on your customers?

As already mentioned at the start, your customers might get addicted to you giving discounts. They may not even consider your regular prices as the basis for doing business anymore.

Also, you may even offend customers who have paid full price, when they get to know that you had special discounts shortly or a few days after they bought from you. Of course, you could not satisfy everyone all the time. But be aware of the feelings you create with customers you haven’t given a discount, if your discounts did not have been very specific.

A specific discount could be something which has kind of a one-time sense to it. For example, if your business has an anniversary. Or you have products which you are taking out of your selection of products. You could even have special discounts for people deciding fast or order early.

Do yourself and your business a favor, stick to the terms of your discounts. Yes, they should have terms. Like set above, if someone orders early (for example two weeks before delivery), than offer a discount. Or you tell your customer if they buy a specific product with 12 or 24 hours, they get a discount. Yet, keep your discounts in a range where you still make money.

The last thing you want is to make a loss when giving discounts. Sure, sometimes it might be tempting to give a bigger discount to win a huge customer. But please only do so, if the life-time value of your customer is really worth it. And remember, we all could become very addicted to discounts, even your newly caught huge customer.

One last thing I usually tell my clients, which you hopefully remember all the time you give discounts in your business, “Discounts are the last resort of a dying business”. I wish this will never be true for your business.

Just in case your business is already struggling from having given too many discounts, you may want to read my article about signs of a business crisis.



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