How and When to Discount Your Price

You’ve heard it. You loathe it…and so I thought you might appreciate a business consultant’s perspective on how to deal our friend, the “Discount Devil,” aka “Can I have a discount?”

But let’s start with when discounts are good. Discounts are worth giving if a client is prepared to give you a very large job. In this case, you might receive a discount from your supplier on materials, and that’s simply something you can pass along to your customer, if you choose. Discounts may also help to sell items that wouldn’t otherwise sell – say for example if it’s off-season for a certain type of product or service.   Discounting may also be effective to get a brand new customer to try something for the first time, as long as you are clear this is a temporary trial price.

But when you continually find you must discount your products and services just to get them to sell, then you may be using discounts for the wrong reasons:

1.    Discounting to match a competitor.  
If you feel you must drop your price to match a competitor, then you are admitting that your product or service is no better than the competitor. In my experience, if your price is the same, people will assume your quality is the same. If it’s lower, people wonder what’s wrong with it. If it’s higher though, people look for what’s better about it – it gives you a chance to differentiate your features.
2.    Discounting to stimulate sales.   
Sometimes businesses are just hurting on revenue, so they decide to have a big discount sale. Bad move. It means they are not marketing themselves well, and if they continue to use price cutting as a marketing method, they could well find themselves bankrupt.  You are better off to use the money you would have knocked off the price to do some well-targeted marketing.
3.    Discounting to a reseller.   Sometimes customers come along who want to resell your services or products…and argue that they should get a discount. Not so. If they’re a legitimate reseller, they’ll commit to volume, and you can give them a volume discount. So don’t just give a discount because someone says they intend to resell.   You may do better selling directly anyway.
4.    Discounting just because you were asked.
  Some businesses feel they have to give a discount just because they were asked. I wouldn’t. It says you had an artificially inflated price in the first place.  Point out all the good value inherent in your offering, or throw in a little freebie service instead if you must, but keep your price intact.

The upshot is, always be selective about your discounting. If someone really needs a lower price, offer a pared-down service or a cheaper product, or just say no. Only then, can you keep the discount devil from pulling you into a hell of debt.

Do you have any opinions on discounting?  We’d love to hear them!