What Should You do About Discount Pricing?

I’m noticing an increased emphasis on discounting prices, especially with the emergence of mobile couponing and services like Groupon. Then there was this recent discussion on Eric Brown’s Facebook page. So what should you do about price?

My opinion is that you should almost never lower your price. It’s basically a confession that you were charging too much before you lowered your price. If you think price is really the problem, and not value, offer a lower-price alternative. A “lite” package of your product or service. Two benefits here: this pricing strategy actually helps customers make a decision to buy by providing context, and you’re not doing the same amount of work for less money.

There’s a lot to be said about pricing and discounts, so I asked for some insight from my Twitter network. The responses contain plenty of wisdom and ideas…

image I think competing on price is rarely a good prospect for victory. I prefer to compete on value for price offered.
Chris BroganBlog
Author of Trust Agents
image At Panchero’s, we actually take a fairly firm stance on not discounting our food or offering traditional coupons. This practice tends to make people loyal to the offer and not to your brand or product. Generally, if we are trying to reach a new customer, or do something promotional, we will just give the food away or donate a catering package to an event. We believe we have the best burrito around and introducing you to our product for free is more likely to make a larger impact on a potential customer. This act builds a much greater relationship with the actual brand instead of with a piece of paper.
Reid TravisPanchero’s
Social Media Manager at Panchero’s Franchise Corp
Matt-Ridings As always, “it depends”. But my POV in general is to *never* discount a price. You can package product, kit products/services, “check in with foursquare and get a free drink”, etc, etc. all as valid means of accomplishing the same thing without discounting the price. I don’t believe in devaluing your product or service.
Matt Ridingstechguerilla
President & CEO MSR Consulting
image I am not, nor have ever been, a fan of discounting prices to obtain business, it just seems like a race to eroding profit. However, we are starting to experiment with Google Local and the various “discounts and coupons” as I sense there are lots of SEO benefit, however our approach will be non-traditional in how we frame the coupons.
Eric BrownThe Urbane Way
Founder at Urbane Apartments
image It’s your business’s death knell. Discounts are the lazy and unsustainable way to generate sales. See Big Three and Employee Discounts. They are the afternoon sugar-rush to finish the day. Both offer a big spike up with a bigger spike down all ending up crashed and burned.
They are the last of a series of bad decisions. These leave a business with no other option than to lower their price. And by doing so, they confess their sins from those bad decisions by saying…we have no real value for you. Others offer the same (or better). But…we’re cheaper. 

And what about your existing customers? Do you discount their prices? If yes, now you’re in free fall. If no, it’s only a matter of time before they see your new prices and leave.

Clearly some industries race into commodity hell. You have no choice then but to lower your prices. That being said, you don’t have to compete to see who takes their company and their customers and their employees over the edge. Find what value you add to your customers. Add it and more. Be sure to communicate it clearly to your customers. Help them be clear in order to make good decisions for their needs.
Zane SafritBlog

image Discounting to get customer is a dangerous game and only one supplier can win that game. I would recommend adding value and distinguishing a product/service another way. 

Ben DruryCogiva

image Dropping your prices should be a last ditch effort. I’m not talking about an occasional sale or early-bird pricing or some other promotion. I’m talking about a knee-jerk reaction. Your business starts to go down so your first reaction is to drop your prices. Your first step should be to take a good long look at your marketing and INCREASE your marketing, not drop your prices.
Dropping your prices is the lazy way of getting sales in the door, and the problem with lazy ways is you may never be able to raise your prices to what you want them to be again. The impact on your brand can be enormous and long-term. 

Only after you’ve done all you can with your marketing should you make a decision to drop your prices. I’m not saying you’ll never have to lower your prices, what I’m saying is try other things first. (And yes, you can try a sale for a short-term solution to get some quick cash in the door, but don’t make it a too frequent event or it’s just turned into another way of lowering your prices.)
Michele Pariza WacekGet Results Blog
Marketing Strategist

image Discounting is ok if it’s part of your brand and used strategically, versus tactically. It can be a reward for loyal customers, it can shift stock in order to get a new product in, or it can trial / introduce a new product to market. The danger is in using it to gain market share. In this case it’s a sign of a weak, commodified brand bereft of value in consumers eyes.
Andy WrightBrand Habits
Brand Consultant
Paula-Pollock Discounting is a slippery slope that is difficult to correct. I advise clients to create layers of products with different price points so there is something for everyone. It’s best described as a sand pail. If you have a sand pail at the beach, you can only fit a few large rocks (premiere products) in it. You can add a lot of smaller rocks (2nd level products), and (3rdlevel
products) will fill all the crevices and you can top it all off with water (entry-level products). Attracting clients at the “water level” allows them to try you out without much financial risk. If they are satisfied, they will keep moving up.
Paula PollockBlog
CEO at Pollock Marketing Group
image Discounting is a cancer in business, that eats at your heart, and at the heart of your customers. Focus on low prices has done incalculable damage to our economies, to our health care, and to the way we use resources. ‘Inexpensive’ has come to mean ‘cheap’ which has come to mean ‘disposable.’ Which has come to mean huge landfills and globalwarming, among other things.
Customers hesitate for a number of reasons, which all boil down to: does this offer really work, and will it get me the results that I need? Discounting your prices is a way to avoid addressing this question head-on. It is admirable to want your clients to get the help you offer sooner rather than later. So address their real questions, which rarely center on whether they are going to save 10-20%. Then they can make a true decision about whether your offer is something they want, instead of just another disposable “good deal.”
Mark SilverHeart of Business
Founder of Heart of Business
image From everything I’ve seen, read and experienced, discounting prices is dangerous business and a slippery slope to retreat from. Much better to come up with non-priced based ways of generating trial or bundling value – e.g,. 15 minute free consultation, or a tasting menu or a wine-paring – that doesn’t allow for head to head price comparisons.
What I like about the Groupon concept is that it guarantees volume in exchange for a price concession + generates word of mouth because of the community aspect of the process. Ideally, it’s used to move products/services when little alternative business comes in and the cost to serve the customer is lower than the traditional means of doing so, thereby justifying a price concession.
Christine B. WhittemoreSimple Marketing Blog
Chief Simplifier at Simple Marketing Now
Jay-Miletsky The reality is when you’re hungry for work and shutting your doors is a real possibility, the pressure is going to be on to lower prices just to get things going. 

The other side of that reality is that while limited time sales, coupons or rebates may work in the retail sector, for service-oriented business, dropping prices can have a long-term detrimental

effect. Consider the following: 

  • Even if you make it clear that the lower price is “introductory” only, prospects almost always forget that particular clause when it comes time to jack prices back up to their normal rates
  • Providing services at a lower cost can be the start of an ugly cycle – to cover the cash shortfall, other quick hits are needed, forcing the business to keep prices low, and putting it in a hole that becomes impossible to dig out of
  • The perception of quality related to the service provided will be discounted, ultimately harming the brand
  • Lower prices will draw a more indecisive clientele who may be more likely to make unnecessary changes and less likely to pay on time.

Keeping prices at their level may be easier said than done, but whenever possible, it’s always the better choice.
Jay MiletskyMango Creative Juice
CEO of Mango!

image Is discounting bad? If you’re selling your product for less than you used to because you’re hoping that price elasticity will bring in more business, you’d better know that your discount is what’s going to activate those reluctant buyers. For many small businesses, this isn’t a given as few have a good grip on these intricacies of their own microeconomics. That’s not to say that charging less money is a bad thing, though. In tough economic times, charging less means
you understand the “pocket problems” of your market and you’re willing to make it easier for them to buy what you sell. And you don’t have to discount to do this, either – just know what price points you need to hit and develop a product that you can market for that lower price. A “lite” version that still delivers great value. Is there another way to structure the deal so that cash flow is easier? Can you bundle in a smarter way? 

We could discuss a number of options here that make sense and don’t devalue your offering – what’s important here is to separate the value from the price and give your market an easier way to say “yes.”
Stephen DennyBlog
President at Denny Marketing

So where do you stand on pricing? How do you handle the urge to discount?

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