Why Discounting Hurts More Than It Helps

Posted by Natalia Atapina on Aug 5, 2015 5:08:40 PM

In cash flow, discounting, small business, sales

You really want to win that proposal, you want to help out a mate, your cash flow is looking dismal, so all you need to do is offer a discount right? Wrong.

The only time discounting truly works is when you have a surplus in stock and are happy to practically give it away.

Offering a discount can make you seem desperate (this might be the case, but it doesn’t need to be public knowledge) which can affect your reputation and tells potential customers that you aren’t worth much.

You also need to consider who you intend to attract as customers. The last thing you want is to find you have a group of customers who always have their hand out expecting discounts and freebies or those who only bought from you because of the saving offered and you never hear from them again.

Offering ‘mates rates’ can have a similar effect and your mate will expect special treatment each time they buy from or hire you- and it is so much harder to say no once the precedent is set.

Actual cost should be the furthest thing from the customer’s mind; instead the focus should be on value. What bang are they getting for their buck?

Perceived Value: Look for inexpensive ways to sweeten the deal. Think of an infomercial- those “call now and receive” bonuses probably cost the seller next to nothing, but along with the product being sold, create the total must-have package.

Actual Value: Using testimonials and reviews on your website, social media and even in your sales scripts, can help put a customer at ease- your product works, your service is excellent and they aren’t just taking your word for it.

Know your customers, their struggles and concerns and focus on how your product or service can solve their challenges and relieve their stress.

To learn more about keeping your cash flow strong, contact the Tradies Accountant team.