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How and When to Discount Your Price

grocery store with sales signs displayed

You’ve heard it. You loathe it…and so I thought you might appreciate a business consultant’s perspective on how to deal our friend, the “Discount Devil,” aka “Can I have a discount?”

But let’s start with when discounts are good. Discounts are worth giving if a client is prepared to give you a very large job. In this case, you might receive a discount from your supplier on materials, and that’s simply something you can pass along to your customer, if you choose. Discounts may also help to sell items that wouldn’t otherwise sell – say for example if it’s off-season for a certain type of product or service.   Discounting may also be effective to get a brand new customer to try something for the first time, as long as you are clear this is a temporary trial price.
But when you continually find you must discount your products and services just to get them to sell, then you may be using discounts for the wrong reasons:
1.    Discounting to match a competitor.  
If you feel you must drop your price to match a competitor, then you are admitting that your product or service is no better than the competitor. In my experience, if your price is the same, people will assume your quality is the same. If it’s lower, people wonder what’s wrong with it. If it’s higher though, people look for what’s better about it – it gives you a chance to differentiate your features.
2.    Discounting to stimulate sales.   
Sometimes businesses are just hurting on revenue, so they decide to have a big discount sale. Bad move. It means they are not marketing themselves well, and if they continue to use price cutting as a marketing method, they could well find themselves bankrupt.  You are better off to use the money you would have knocked off the price to do some well-targeted marketing.
3.    Discounting to a reseller.   Sometimes customers come along who want to resell your services or products…and argue that they should get a discount. Not so. If they’re a legitimate reseller, they’ll commit to volume, and you can give them a volume discount. So don’t just give a discount because someone says they intend to resell.   You may do better selling directly anyway.
4.    Discounting just because you were asked.
  Some businesses feel they have to give a discount just because they were asked. I wouldn’t. It says you had an artificially inflated price in the first place.  Point out all the good value inherent in your offering, or throw in a little freebie service instead if you must, but keep your price intact.

The upshot is, always be selective about your discounting. If someone really needs a lower price, offer a pared-down service or a cheaper product, or just say no. Only then, can you keep the discount devil from pulling you into a hell of debt.

Do you have any opinions on discounting?  We’d love to hear them!

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Jacqueline Drew
About the Author - Jacqueline Drew

Jacqueline M. Drew, BComm MBA is CEO of Tenato Strategy Inc., a Calgary-based marketing research and strategy firm. She loves to use her superpowers “to help the good guys win” and is also an energetic supermom, bandleader and songwriter.

6 thoughts on “How and When to Discount Your Price

  1. I’m wearing my customer hat now… What about these new-fangled ‘group buying’ programs like Groupon, SwarmJam, DealFind, Kijiji, etc? They must work for the company or they wouldn’t do it?

    They have not worked for me after about a dozen tries.

    I have found that anything that requires an appointment is bad news….I’ve been burned three times on that. I’ve been burned with a computer service ‘deal’ to ‘speed up’ my laptop and instead rendered all of my e-mail files and address book useless. Catastrophic loss and I was thinking I was so clever to get a couple hours of technician time really cheap.

    And over the weekend, my tech savvy grandson was setting up my 7″ notebook purchased via one of those discounts found that the keyboard doesn’t work. Junk! and nowhere to turn for service or a refund.

    Bottom line for me, the customer, steer clear of online ‘group buy’ discounting.

    I wonder if you or anyone else has had experience with this form of discounting products and services?

    1. Holy smokes re: Groupon, I was talking to someone recently about that – a store had done so “well” on Groupon that they completely decimated their margins and were going bankrupt. I’ll do some more research here into those other ones, but in general I think it you’re dropping prices to drive traffic, you’re heading in the wrong direction, and only attracting vulture-shoppers.

  2. We discount to create artificial deadlines. “Sign up by Oct 31 to get a lower fee.” It helps get the price sensitive leads to sign up so we can focus on leads with other objections afterward.

    1. Yes – that’s another good reason to do it that I hadn’t thought of when I wrote this blog. Tickets, events — time sensitive bookings of things — makes a lot of sense here too. Thanks for your thoughts!

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