When You Learn How Much You’re Worth, You’ll Stop Giving People Discounts.

You have probably heard a salesperson say the equivalent of “To get this sale, I need to cut the price. Once they see how awesome our products are we can charge full price. Is that okay?” You have probably responded with “It’s not desirable, but only if it’s just this once. Things are tight now and we really need the sale.” Or maybe you haven’t.

Truth be told, it’s never just once. That customer will then tell their friend about the great deal they received. That person will come, expecting to get the same deal, and will find the original price. They will feel cheated and the original customer will feel that you are being unfair. The next time the salesperson will feel insecure and not want to “jeopardize any future sale” so then more discounts come and little profit is made. Discounts can lead a company down a dangerous road.

 

 

Discounting is the D-Word. It’s distracting and demeaning. It is destructive and depressing. For example, department store sales have declined because of their many sales, they have trained their customers not to shop if there isn’t a sale. Over time there has been the creation of the Post-Recession Consumer, a name fashioned by Harvard Business Review for those who “new thriftiness and desire for simplicity” changes how businesses sell their products. In situations similar to the one mentioned above, don’t get desperate.

“If you can’t land the customer at the profit margin your business plan is built upon, then that particular customer is not worth having” (SF 1).

 

scissors cutting a 100 dollars banknote

Cutting Your Profits?

Discounting is dangerous because it shows:

    1. Lack of confidence. It shows your customers that you don’t believe in what you’re selling or that you can’t sell it at its standard price.
    1. Bad precedent. Once you have discounted an item, you have reached the point of no return. There’s no going back. Most people won’t buy until there is another sale. “You don’t want to set the precedent that every time your customer buys from you, it’s at a discounted price.”
    1. Lower perceived value. People base value on price. “Sales prices are often nothing more than statements of what you should really be paying for something.” So cutting the price causes customers to question what the real value of the item is. Is it the original price or the discounted one? They then judge the product to be worth less than its real worth. The price integrity is compromised.
    1. Untrustworthiness. When a salesperson tries to sell a product or service, they state the price and talk about the benefits the product or service will give the person. When the conversation starts going downhill, a discount may be proposed. The customer may start thinking “Wait, but they already told me this is the very best they could do and now they’re offering me a discount? What else haven’t they been honest about?” This creates a relationship of distrust.
    1. The “Price” Conversation. The main conversation should be all about the value of the product, but when a discount is offered, the focus is moved to the price. It’s harder to sell things based off of price than of value. It’s difficult to focus the conversation back to the important things such as the customer’s needs, and how your product or service can help them.
    1. The Profit Cuts. If you discount your products 50%, you must sell twice as many of them to reach your profit goal. Reality check here: “Do you have the time or the manpower to do that?” If not, you will always be running to catch up to your goals and schedules.

 

american dollars in the hand

Giving Away Your Resources?

So what do you do now? How can you avoid using discounts? It’s simple, but the change of mindset will take effort:

  • Change how you look at your customers, and target the right ones. Assess their needs to determine how you can better help them. Ask good questions and listen. What are their goals? What do they struggle with? What is their day-to-day life like? Salespeople rarely do this. They focus on selling as many products as possible and not about finding the right customers that need their product. They offer discounts because they don’t understand their customer’s needs. It is suggested to “never attempt to close a sale until the customer has identified to you the benefits they want and the needs they have.”
  • Focus on value. This should be a large priority. Like the previous point, you must understand what your customers value, but you must show to them the value of your products. And remember, when a customer truly understands the benefits they are receiving, they’ll pay the full price and not expect discounts. “Make what you’re selling a no brainer.”
  • Prove that your product or service actually works. Testimonials, case studies, and videos of customers talking about their experiences with your products or services can be very convincing.

 

  • Be confident! Believe in your product. “If you don’t fully stand behind what you’re selling, it will show.” The most successful salespeople are those who are confident and passionate about their product or service. You can be that successful person.

If you ever discount, have a good reason for doing it. There is a benefit of discounting, in that it can bring in new customers. But that’s one of the only benefits. Examples of good discounts that don’t make your customers suspicious are volume discounts, where the more one buys, the cheaper the item is, prepay discounts, to keep accounts receivable current, bundled deals, to increase transaction size, and seasonal sales. These discounts have few negative ramifications.

For those few discounts businesses may have, only discount for a brief period of time. Discounting is like a drug – it’s addictive and should be used a “limited time to treat specific conditions.” Discount “to achieve a specific business objective without compromising your brand’s overall value perception” (Business). For example, Apple’s student discount has the purpose of getting the younger generation hooked on Apple products, and to meet the needs of the average poor college student.

Every business struggles with discounting. But the difference is that some people learn to do it a whole lot less than others.

 

See the Instagram post that inspired this article.

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