A Letter from Jane
Are Discounts Cheapening Your Brand?
Tell us your thoughts below!
This past week — because who here doesn’t procrastinate? — I tossed an idea to Jenn about offering a discount for the upcoming holidays. As soon as the words left my mouth, we both scrunched up our faces.
We weren’t feeling it. Then we started to explore why. So this post was born.
Let’s cut through the BS: we all want to make as much money as possible, while providing the best possible customer service and client experience. Can discounts and offers get us there? Let’s explore some scenarios.
Oh, no! A Prospective client wants…
… a discount I offered last month or to another client
… to match competitor pricing
… a discount for every project
Imagine how you would feel if you found out that someone paid 50% less than what you paid full price for. Offering discounts to some but not all can breed resentment amongst your community. Clients feel resentful that they weren’t offered what another client was AND it’s not great for you either. Now you’re operating under more than one price structure for the same solution. This means your profit margin is all over the place. You feel a smidge of resentment and regretting taking on the client. Sound familiar?
Why do we charge what we charge? (How We Come Up with Our Profit Margin)
I have a strange intuition about what things should cost. It’s a superpower. However, we always do our research and compare it to the hours our team takes to complete a project. We know a brand design, website, or marketing project should take X amount of time. We’re profitable so long as we stay within that range. If we spend more time than allocated, we go into the red. Simple enough, right?
Why is discounting bad?
- It sets the precedent that they will be able to get your product cheaper at some point. (Why pay full price?)
- It’s not fair to your current customers and may cause resentment if they find out.
- Are you offering a discount because you can’t get work? Be confident and believe in yourself and your services.
- You’re making less money for the same amount of work.
- You are giving less than 100% because you know the project is discounted.
- It can give the perception that your services are worth less.
If coupons cheapen your brand, why do so many people use them?
There is a bit of human psychology involved. If you put something on sale, your audience perceives it as an opportunity to get more value for their money. Therefore, Black Friday still has its luster. Brands that are usually full price year ’round only offer a discount perhaps once or twice a year, retaining the full value of their products or services. If you offer a coupon every month, that is what your customers will expect — and what they are willing to pay. The discounts become, in their minds, what your brand is actually worth. Use coupons and offers sparingly depending on your industry.
Are you saying most companies shouldn’t offer discounts?
Not quite. For some industries, it can bring in new customers. For example, retail and hospitality can benefit from coupons, especially if they are consistent. Restaurants in particular are known for having daily, weekly, or monthly specials. Applebees has a 2 for $20 deal, which caters to those on a shoestring budget. You’ll notice the portions are smaller. This is a good way to preserve full value for full price. You may also have visited a restaurant with lunch and dinner prices. Lunch, always less money, has smaller portions. Research your industry to find out what’s standard and figure out how to do it better.
According to the Valassis Coupon Intelligence Study, when choosing a restaurant, 32% are most motivated to select a location based on “price offers.” […] Coupons and “value menus” were also given significant importance, with each accounting for 29% of what consumers said motivated them to go to a particular restaurant.
Keeping discounts to a minimum, in most cases, is the best policy. Free trials and offers for new clients communicates that you are so confident in your product that they will be lifelong customers. Communicate a solid time limit for the trial.
Other Ways to Win Hearts
- Show your value. What makes you different from your competitors? What are they getting for their money?
- Ditch what they don’t need. If possible, you can meet their budget by simply removing uneeded and products. Now they are happy and so are you.
- Send them someplace else. If it’s not a good fit, that’s okay. Send them to someone who is. They will remember you for being helpful and honest.
- Offer payment plans if your services are expensive and people need to spread them out over a few months.
- Give people options for how to pay. If you’re not taking credit cards yet, you’re hurting your business and making it less accessible to people who don’t keep a lot of cash in the bank.
- Donate a portion of proceeds. If you want to give back to the community in a way that wins a bit more gratitude, try making it an added perk of shopping with you. With every sale, you’re supporting a good cause and your clients can feel good about working with you.
A Cameo Appearance — Jenn
Jane pretty much said it all. The only thing I’d add is that discounts and coupons are the opposite of high-end and luxury. So think about your brand and target audience. If you’re trying to communicate that you’re boutique or cost more than competitors but it’s worth it for your amazing service, then discounts are NOT the way to go! If your brand personality is more about affordability and being accessible for all, then coupons could work for you.
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