Why discounting your product is not always bad
Anything goes in business. If you have a clear understanding of how discounting supports your overall strategy then it’s fair game.
I’ve got discounting on my mind.
It’s on my mind because I used to work in an industry where product was always being put on sale. There was an expectation set and customers were trained to only buy with a discount. And it was clear, from some of the companies I advised and worked with, that this trend was undermining their brand image and the overall health of the company.
Fast forward, and now I’m frequently hearing the opposite: “Oh don’t ever discount your product. You should never make offers or put things on sale. Don’t adjust your pricing if someone can’t afford it. If a client or customer can’t pay for what you are offering then too bad for them.” And, this belief system worries me just as much as the former.
Here’s the thing — anything goes in business. If you have a clear understanding of how a certain tactic supports your overall strategy then it’s fair game. If you can see how occasionally offering freebies and discounts helps your business in the long run, then absolutely do it.
As entrepreneurs we have a tendency to jump on the bandwagon and hitch ourselves to trends just because other people are doing it or saying it’s right. Then we start or stop tactics at whim without thinking through how it helps or hurts our business.
But on your path to building a six-figure business and beyond, you will only know what works for sure once you put it out there and test it. Don’t drop everything for an idea before you experiment to see whether it resonates with your customers and supports your business.
Below are a few instances in which discounts and freebies can be tastefully integrated into your strategy to support customer loyalty and revenue growth.
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Testing out a new product
If your business is new or you are testing a new product or service then you need feedback in the early stages so the final version is a perfect fit for your customer base.
You can offer the in-progress version at a substantial discount to a small subset of your base in exchange for feedback. Getting direct insights to refine the final product will more than pay for the cost of the discount.
Expanding to a new segment
If you are interested in switching or expanding to an entirely new market or customer segment then you may have to play around with your positioning (including messaging, pricing and more) to incite them to trial and see what resonates most.
In some cases this may mean adjusting your prices down. If you carefully consider the impact on your existing customer perception then you’ll minimize the risk of cheapening your brand image.
Delighting loyal customers
Sometimes you just want to do something nice for your most loyal patrons. You may want to surprise and delight them out of appreciation for their support. By all means, go for it.
Offering a free gift or rewarding them with a discount is a great way to strengthen that relationship. I don’t care how high end your brand is, expressing gratitude in a tangible way goes very far in building your business.
Packaging and bundling your offer
This is a tactic that allows you to give and get more value in exchange for a substantial discount. For example, I’m happy to coach clients on an a la carte per-session basis but most entrepreneurs prefer my three-month package that offers a significant discount off my standard rate and a few other bonuses and perks. This also allows me to work with a client longer ensuring we have enough time to yield desired results.
Offloading poor performers
At some point every business will end up with a dud — a product or service that for various reasons just doesn't perform. It’s not worth taking your business under to maintain a brand image.
If you aren’t in the financial position to stomach the losses you may have to discount your offering to capture back value. That’s ok occasionally — just be more mindful in your development process going forward so this can be the exception and not the norm.
So there you have it. Discounting can be a powerful business lever when used strategically. But the bigger takeaway here is to be wary of all or none advice. Words like “always” or “never” are not only seeped in weak assumptions but also halt the creative thinking process.
In whatever you do try to be open-minded, be sure to experiment, and consider how it aligns with your core strategy.