Discounting… if you have followed me for a minute or two you will know how I feel about it. If we are just meeting for the first time, let me tell you. I hate it. I really, really, really hate discounting. Sometimes it is a necessary evil, mostly it is just a bad way to market your business. It is also a honeypot for bargain hunters, who I shall remind you, are not the ideal customer.
Many small businesses get stuck in the price discounting marketing trap. It can feel like the only way to increase sales is to drop your prices. Do you know why? Often this is the ONLY time you’re marketing your business and when you do market it is to people who are not used to paying full price.
Let me give you an example:
Suzie sells candles. She has been slowly building her business, but making a sale often feels like pulling teeth. She spends her day posting on social media and creating new scents to expand her range. She is hoping that her new creations will be the tipping point, she will finally create the candle everyone wants!
Suzie knows her candles cost around $6 to make and she sells them for $15 which is MUCH cheaper than competitors (another mistake… being much cheaper than competitors confuses customers).
Here is something Suzie is about to learn the hard (and expensive way). Her new candles are not going to be the tipping point. No one is going to buy her new candles unless she discounts them to her sale price of $8.
Here is why
Suzie has done nothing to market her candles to the right target market. The ONLY time she sends out an email to generate sales or advertisers is when she is going to discount. Other than sales she does nothing to market her business. She is in a bad cycle of creating, waiting, discounting. When she discounts she attracts people who will only pay $8 for a candle. They are not $15 candle type people.If she sends out a newsletter to her current customers to say she has a new scent they are not interested. As a result, Suzie thinks her new scent sucks, but it doesn’t. The scent isn’t the problem, her marketing is.
If you have built a database or customer list on discounted pricing, you’re going to struggle to charge your normal price. If the only time customers hear from you is when you discount, you’re going to feel like no one will buy at full price. That isn’t true. You’re not asking them to buy at any other time.
“If you’re always discounting why would I buy at full price?”
My favourite place to shop discounts all the time. They do it so often that now I wait. I am not a discount hunter. I am about ease, not savings. I will pay a premium if it makes my life easier. But they taught me to wait. They taught me that they have an offer every six weeks. So I wait.
Not all discounting is bad
Discounting isn’t bad if it is a step in a sales funnel that drives future sales. You might have an introductory product at a price that will encourage people to try it out, followed by a kick-ass sales strategy that upsells. Maybe you discount as a way of adding scarcity to your offer to get people off the fences and into buying mode. It might be a legitimate way to clear old stock before a new season. As long as it fits into a plan you can discount. It should not be used as a one-off strategy to drive sales.
How do you fix the problem?
You go back to square one. You redefine your target market, you reassess your product costs and how they align with competitors. You make sure your price has room for marketing. You start marketing and advertising regularly and you test and measure your results until you find your sweet spot! Oh.. and you stop creating new products until you marketing that works!