Get Results by Adding Value Instead of Discounting
Don’t Discount Your Prices
Most businesses think that the best way to attract customers is to discount. This is a misconception. What’s the point of having a recommended retail price if you don’t use it? And why shouldn’t people pay your full retail price? Remember this critical business rule: Don’t discount!
Discounting creates a perception in the marketplace that you are cheap, that the price you have on your stock or service is too high because you always offer a discount, or that you don’t value your product or services. It also affects your business long term. When you discount, you encourage price shoppers, not loyal customers.
A far better way to do business is to add value rather than discount. Offering things like free delivery or throwing in extras like slow-moving stock that you have trouble selling anyway is far preferable to discounting.
The trick is to offer products or services that have a high perceived value in the mind of the consumer while having a low hard-dollar cost for you. Offering anything is better than cutting your prices.
Adding value is a simple concept. It means that customers will get more for their money. Rather than giving them the same for less, you give them more for the same price.
You can generally add a lot of value for a small outlay. Put another way, the perceived value of what you give the customer may be high, but the hard cost to you will generally be low.
When you slash prices and take off $15, that’s $15 that you’re not getting. When you throw in something with a perceived value of $15, it’s costing you far less. Perhaps the hard cost on the item is as low as $5. If you were to give a full $15, you could give something away valued at $45, assuming your margin was universal.
For example: Imagine if a mechanic offered you $20 off your next service. That’d be pretty good and maybe even enough incentive for you to make a booking then and there. The problem is, the $20 is half the profit margin on the service. If the mechanic does this for every customer, he’ll cut his takings by 50%.
Instead of the discount, the mechanic could choose to add value by throwing in a free wheel alignment (valued at $25, but negligible cost to the mechanic because he already has the equipment); a 1-liter bottle of premium oil (valued at $7.95, but only $2 hard cost); a two-for-one voucher for a car detailer (valued at $35, but free to the mechanic if the car detailer wants to promote himself); a free engine performance test and print out (again, free to the mechanic but a $15 value); and so on.
In the end, the added value offer will bring you more customers and cost you less. It may also introduce customers to other aspects of your business. So, before you reach for the markdown pen, think about how you can add more value (creatively and economically).