If this topic sounds contrary, you bet it does. Nowadays, every company is offering discounts of one sort or another on their products; not getting on the discount bandwagon seems like a losing business proposition. Yet if you stop for a minute, you will find the issue is not as simple as it appears.
There are some products described as prestige items that do not sell well at low prices. For example, if you went into a BMW dealer’s showroom and saw a latest model selling at 50% discount you will wonder if it’s really a BMW. People who buy such cars, do so for the prestige it brings them because few people can afford to buy them.
Products like flowers and jewelry are bought because of the emotion or sentiment attached to them; discounting them will not necessarily increase sales. Let’s say, if you wanted to buy some flowers for your mother for mother’s day, or for her birthday, you want the best flowers that money can buy to express your love for her. You will not buy a low quality bucay of flowers even if it is selling at half price.
The difference between your costs and selling price is your profit. When you discount your price it reduces your profit margin, leaving you less money to start a new product line, or to expand your business.
Unless you have the means to spend a lot of money on advertisement, discounting your price will not bring you the increase sales to compensate for the lose in profit margin. The reasoning for discounting is that if you cut your price by half, your sales should double to make the same profit you made before the discount. If this doesn’t happen you are losing money.
Frequently discounting your price will inform your customers to wait for the next discount before buying from you, and when they must buy at regular price because they cannot wait, they will resent being forced to buy at a higher price, and this could affect their decision to buy from you in the future.
If these 5 reasons for not discounting you price are too contrary, and you must discount your price, by all means do so, but first look at some alternatives you might want to try.
Make your customers to earn their discounts by meeting certain conditions like the more items they buy the more discount they get, or becoming a member of your fan club.
You may also offer your customers discounts for making early payment for items they bought on credit. This will encourage them to make payment soon rather than later, in order to get the discount.
You may also offer your customers discounts with a sales technique like, buy one get one free, or buy one and get two free. This form of discount has been shown by market research to be popular with customers.
Whatever you do just make sure that discounting your price does not cause you to incur a crippling loss. A discount strategy that loses money on some of your products, but brings in more money on other products will compensate for the loss from discounting your price, and keep your business afloat.