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

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4 Steps to Become a Discounting Expert

Last time I mentioned the squash court owner who found a right amount of discount to fill their unscheduled lunchtime gap. Most service providers aren’t in such an obvious situation. Unscheduled appointments tend to scatter more randomly around the whole day. There are four key things to look out for if you want to become a discounting expert.

1. Do your market research

You might think market research is a hard task that only senior professionals can do. Actually you just need to take a look at your competitors a bit, doing something called a “competitor analysis”. This varies based on the size of the business, but you really just need to answer the following simple questions:

Which service providers are your top 5 biggest competitors?

Are your prices lower or higher than theirs and why?

How do they discount? (Do they use a daily deal website or an online appointment scheduler?)

2. Know who you want to attract

To engage an effective marketing campaign, you need to do some targeting. A first step could be to target the customers who come back only rarely or visited you only once. To retain clients is always cheaper than continuously trying to get new people in, because you do not need to spend more and more on advertisements. With their loyalty increasing, your advertising cost will be decreasing.

3. Choose services wisely

When doing your market research, you will see that similar service providers are promoting very similar services. Hairdressers are promoting mostly haircuts and blow-dry, yoga teachers group yoga classes and so on.

If you want to catch the eyes of your potential customers, you need to be more original! Take a moment, sit back, and think about what your clients want from you. An average hairdresser sells haircuts but a unique hairdresser offers party hairdos or “luxury hair repair treatment”. Most yoga promotions are about the yoga classes, you can be unique and offer “balanced body posture” or more customized, tailor made deals. Choose a service that is not overused on promotion platforms and also defines your image a bit.

4. Overdiscouting and Underdiscounting

To set the discount bar on the right level is the art of pricing. The best way to achieve success is to test your promotional prices. You do not want to sell your services cheap, because it won’t create profit and will also cheapen your business’ image. You also do not want to give too little, because it won’t create the necessary buzz and new clients won’t show up. A safe lane in discounting is to be found between 30% and 75%.

How can you test this? Use pen and paper to simply put it on your front door. Make two variations. First week try a lesser amount of discount (e.g. 30%) and on the next promote the same service with a higher 50%. You can also add that it is a limited offer and you will only sell 5 or 10 of it. Don’t forget to say that this deal is applicable only for appointments between 8am and 1pm (or any other off-peak time period).

Try it! It will work out just fine!

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

Read More