Discounting is Slowly Killing Your Business
Sluggish sales have your reps searching for ways to meet quotas or to up their take-home pay. So, they cut prices to incentivize customers to buy more or sooner than planned. Sound familiar?
Using a small discount to create sales that otherwise wouldn’t happen sounds like a smart tactic. The practice certainly can be useful, but left unchecked it can destroy your business in the long run. It can not only eat away at profits, it can also damage the perceived value and quality of your brand.
Are you tired of discounting doing little more than providing short-term sales spikes? To start using price cuts more intelligently, try out these proven strategies.
Stop Continuous Discounting
First, put an end to giving sales reps free reign to offer discounts. When you offer discounts year round with no rhyme or reason, customers will eventually begin to expect them. Discounting loses all value.
Even worse, nonstop price cutting can give your brand a bargain-basement feel, which will eventually attract cheap customers only interested in the lowest price. This is dangerous territory if you are selling a quality product or service.
Create a Plan
Too many businesses use pricing discounts haphazardly — they offer them when panicked about numbers as a way to drum up quick sales. In fact, successful discounting should be strategic and part of a long-term marketing plan.
Start by setting goals for discounts. They can be used effectively to move dead inventory, attract new customers, retain loyal buyers, create buzz for a new product/service, increase market share, or damage the competition.
Then, incorporate strategic discounts into your marketing plan. Use them to support other efforts throughout the year. For example, create a discounted introductory price for a new product and use it as part of the overall launch strategy. Make sure your sales team is aware of and sticks to the discounting plan.
Test, Test, Test
Every business is different, based on type of service or product, customer demand, seasonal fluctuations, and more. To determine what promotions schedule works best for your business, you’ll need to test a lot of options.
A/B testing, or split testing, can work well for this. Try offering one price to half of your customers and a discounted price to the others to evaluate the effectiveness of the cuts. Do this throughout the year, tied into various seasonal events and marketing efforts. Evaluate when the discounting had the greatest impact and hone your strategy for future promotions based on the results.
Bottom Line
Don’t discount discounting. It has a rightful place in sales and marketing. The key is to cut prices carefully and thoughtfully. Doing it too often or too deeply can threaten your ability to turn a reasonable profit and maintain a good image.
Using smart planning and deliberate planning will help you create a tactical discounting program that delivers impressive and sustainable results.
I am currently writing a book called All Leaders Make Mistakes. You can read the opening chapter here at this LinkedIn Pulse article. Comments always appreciated.
