Beware of the impact of discounting on your long-term strategy
By our News Team | 2022
While cutting prices may give your business a short-term boost, ultimately it is likely to be detrimental to your goals.
Is cutting prices for products or services a good strategy for entrepreneurs and small businesses looking for a quick sales boost? Rather not, says Krista Mashore, a best-selling author of four books, business coach and digital marketer.
Writing in Entrepreneur magazine, Mashore says she’s never found discounting to be a successful long-term strategy, unless it’s done properly. Among the reasons to be wary of a discounting approach:
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Lower price is perceived as less value
“Most of us believe that you get what you pay for; whether it’s a product or service, we unconsciously associate higher price with higher quality,” she notes, adding that when she worked as a real estate agent it was common for agents to discount their commissions.
She rarely did. “If a person didn’t want to pay what I was worth, then they didn’t appreciate the benefit I could bring to them as their agent.”
So, ask yourself, “Do I really want to build my business on clients or customers who don’t value what I have to offer — who don’t think I’m worth full price?”
You become a commodity rather than a true value proposition
A commodity is interchangeable and replaceable, and you don’t want what you offer to be just another something that customers can find anywhere, from anyone, Mashore explains.
“Instead, it needs to have a unique value proposition; when you offer a commodity, the only thing you can do is lower prices to compete in a competitive market, and there will always be another business that will come in with prices lower than yours.
“Put simply, there is no benefit to being the lowest or second lowest in price, but when you have a unique value proposition, you set yourself apart — offer something that no one else in your industry does, so price is not an issue.”
You’re training people to wait for the discount
Everybody wants a good deal, so they’d almost feel foolish paying full price when they can just wait it out until the next discount comes along. The result for a business is erratic cash flow and workloads that spike then plummet drastically.
You can read the full Entrepreneur article here.