Offering discounts is a form of selling on price. When you offer a discount you are taking the focus from the value you provide and placing it squarely on your price.
To maintain higher prices you have to be adept at selling value. Discounts erode your ability to do that. Any reduction in prices can damage your price integrity. Later, getting the same customer to stop thinking about price and refocus on value can prove difficult.
Discounts actually reduce the effectiveness of whatever is being discounted. By that I mean that the discounted offering literally does not perform as well as it did at full price.
Potential customers paying substantially higher rates expect a better experience and mold their assessment to their expectation.
Discounts can also lead to dissatisfaction in clientele. Discounts can lead your clients to ask themselves why your price can be discounted. They look at the price they have been paying, and then they look at the discount. They then wonder why they can't get that price some other time.
If they recently paid full price for a product now put on sale, they feel cheated. This is why it is so imperative that you always give a good reason for a discount and that your rules are solid.
Never have predictable sales or flexible terms. If there's a sale, it has got to be for a specific reason with specific rules.
Discounts can be a great way to modify behavior. Volume discounts are an example of this. They make sense in the buyer's mind.
Potential customers are trained to expect that the more they buy the cheaper things will get. So potential customers are generally not skeptical or resentful if you give this type of discount.
The same goes for prepay discounts and bundles. Prepay will help to keep your accounts receivable current while bundles can increase your transaction size.
Businesses with seasonal slumps can disclose that as a reason for discounts at a specific time of year, with few negative ramifications.
A good "because" can mitigate damage to overall price integrity, reputation, and relationship with regular customers, and can create the kind of behavior you want from the customer such as buying now, not later; during off-season; bigger quantities.
As for using discounts to bring new customers through the door, have something that is designed to be the thing that you use to drive traffic. By doing that, you can isolate the damage discounting will do to your price integrity.
You can preserve full, fixed pricing for all products other than that one thing you discount during new customer promotional campaigns.
If you must discount, don't be predictable. This is the only way to negate training potential customers to expect something. If you do the same thing at the same time, every time, you train them. Once you train them to expect something you have to deliver it or you sow the seeds of discontent.
If you frequently discount, they'll lose all faith in real prices and buy only when you run sales, then build up immunity to that, forcing you to conceive bigger sales with bigger discounts and more free gifts.
Add bonuses instead of discounting. Never discount the main offer. It teaches your customers that your prices are negotiable (which is terrible). Adding bonuses to increase value to close the deal is far superior to cutting prices. It puts you in a position of strength rather than weakness.
When you decrease your price, you…
Decrease your clients' emotional investment since it didn't cost them much.
Decrease your clients' perceived value of your service since it can't be that good if it's so cheap, or priced the same as everyone else.
Decrease your clients results because they do not value your service and are not invested.
Attract the worst clients who are never satisfied until your service is free.
Destroy any margin you have left to be able to actually provide an exceptional experience, invest in your potential customers, invest in growth, invest in more locations or more scale, and everything else that you had hoped in the goal of helping more potential customers solve whatever pain points that you solve.
When you raise your prices, you...
Increase your clients' emotional investment.
Increase your clients' perceived value of your service.
Increase your clients' results because they value your service and are invested.
Attract the best clients who are the easiest to satisfy and actually cost less to fulfill, and who are the most likely to actually receive and perceive the most relative value.
Multiply your margin because you have money to invest in systems to create efficiency; smart potential customers; improved customer experience and scale your business.
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