Monday, 9 February 2015

Published 10:00 by with 1 comment

3 + 1 problems with discounting and their antidotes

There’s a common and understandable question asked by local service providers, salon managers and coaches.

“Anyway, why should I discount at all?”

“Discounting means I earn less. It downgrades the image of my business. For coupons I get a lot of non-returning, often problematic customers. My services are worth it!” These are some of the common arguments against lowering prices. Let’s face it, some of these reasons can be right in certain cases. I’ll talk about how to avoid these disadvantages mentioned above.

1. You earn less while discounting

Those who say this do not see the bigger picture. Discounting can be actually done in a way so it won’t harm your business revenues. The truth is, when you give discounts only on specific terms (e.g. only to new customers for a possible future return, only for off-peak or last minute appointments, etc.) you will see an increase in profits. These discounts let you motivate either more spending per customer or realize more potential clients.

2. Downgrading the company image

Most salon managers think that the image a discount tag relays is “We are out of customers! Come in and SAVE US!”. They shouldn’t be afraid, because for an average client an average discount only says that “Hello dear Customer! I am aware of your needs. I’m being flexible here!” The solution is to mix some originality with decent drop of your prices. Try to create special days (e.g. Monday – A quick blow-dry before work (Just GBP X on Mondays), Friday – Party styling (-50% before 6 p.m.), it will send a much different and more positive image of your business.

3. Non-returning customers

I recently ran into an article on the web (by author Tommy Baker), which stated that discounts are killing the fitness industry. One of his statements was about the clients you can get for couponing: “These clients want fitness in the same fashion they want a blender at Wal-Mart: cheap and of poor build and quality, with promising features and benefits. Something that will have to be replaced quickly, but it was a “deal” so the buyer feels fantastic.” A portion of these purchases are impulse buys only so it will be hard to convince these customers of returning later.
An effective way to increase the rate of returning customers is to create discounts that can be sustained in the long run. It is clearly a no-go with 90+% on everything you offer, but can work out with 30-50% on well-specified, unique services with off-peak appointments.

+1 Your services are worth their price!

When I was training to be a sales agent, my supervisors never-ever allowed us to give discounts to customers. The mantra was: “we are worth our price”. It was true to some of us and not so to others. I believe that an exact and acceptable price can be set for every service and every single service provider, and that price should be something what represents both quality and quantity. Although nowadays discounted prices have become a somewhat of a necessity to gain potential clients – it is the entry barrier for a broader audience.
A simple solution could be to calculate some profit reserve for occasional price lowering. If it is not possible because of the fierce competition, your only chance for a win-win scenario is to become an expert on discounting (Here youcan find 4 steps to become one).

About the Author: Balazs Monos is the founder of Reserveline, a marketplace that lets service providers sell their unscheduled appointments to potential customers at discounted prices. Balazs has spent 7 years in sales and marketing in both B2B and B2C fields. He offers free consultations on client acquisition and pricing strategy for local service providers from and around London.

Also find him on Twitter! @reserveline

1 comment:

  1. Look upon discounting as an attempt to monopolize your segment of the market and gain customers who wouldn't bother buying or who would put off the purchase. Discounting attracts buyers would would not normally see the value in your proposition unless their is a perceived increase in value though a reduction in price. Examples of this are 20% discount on men's haircuts on a Thursday and senior citizen discounts for a full wash, cut, dry, and coloring.