Let Put This Bluntly: Discounts Are For Dummies!
Dave Wakeman
C-Suite Advisor | Helping CEOs, Executives & Boards Achieve Breakthrough Growth & Profits
I've been getting a lot of emails lately from readers of these pieces where the email sender leads with a discount.
"Hey, I've got this new conference...come, here's a code for 50% off."
"OMG, we are offering up the world's greatest networking event! Usually it cost $100, but if you buy today, I'll give you a discount of 99%."
And, on and on.
Where to start?!
Where to start?!
Well, I've got to be pretty up front with this...let's start with the discounts because they are really stupid.
I've really never spent a whole post on here discussing the way that discounts destroy your brand value, but I think that the way that discounts are just being thrown around like crazy demands that someone address the situation and hopefully bat away some of this needless discounting.
First, let's look at the 3 biggest issues you are dealing with if you are discounting.
- If you lead with a discount, you are telling me that you don't really believe in the full value of what you are offering me: Nothing says I don't trust the value of my own product like a discount. If you lead with a discount, you tell me that you are just pulling things out of thin air in regards to pricing and that your idea of pricing is really to throw a desperate Hail Mary into the air and hope that somewhere in the middle, someone jumps up and bats it around and buys it. But that doesn't really happen in the real world. Instead, most of the time people wait for the next lowest price or the next "better" deal.
- You set off a mental trap door in your customers' or prospects' mind that can't be closed for 7 years: Discounts aren't just a bad look for you, it goes deeper. Like into the depths of your brain deep. Martin Lindstrom wrote a tremendous book about the psychology of buying called Buy-Ology and in the data from his study is an interesting tidbit that goes to the effect that once you start discounting, the brain of a consumer sees you as a discount brand for around 7 years. That's an entire generation of buyers you lose if you throw around a discount indiscriminately. Is that sugar rush worth it?
- If you make yourself so willing to discount, you have no opened the door to "how low will they go?" This piggybacks on the back of the first point about you not having confidence in the value of the product or service you are selling, but goes a step further because once you start discounting, you have to give more. You can never give less. And, combine that with the idea that you are a discount brand in the consumers' mind, it becomes a never ending cycle for consumers. You can never give enough away. You become a discount brand that can't turn that around. On and on and on.
But what's the other side. How can you offer promotions and sales that don't turn against your brand?
The key word is to focus on: VALUE!
Here are three better approaches than discounts.
- Price correctly: One of the big challenges that I see in a number of industries is that organizations don't really have any clue about how they are actually pricing their products and services. So they throw prices all over the place at the market. Some companies go with the we will get them in on free and get them to pay from there. Others come up with the ridiculous overprice and discount strategy. Here's a fix, figure out what the value of your product or service is to the average consumer and price accordingly?
- Increase perceived value: One of my favorite tools for increasing prices is to increase the perceived value of the product and service that I am offering. When I worked in the secondary ticket market, I had years where I averaged over 50% service charges and never got a complaint because I wouldn't just sell a ticket to a show, but I would help direct people to other popular attractions, tell them where to get the best beer or steak in NYC, and in some cases even make dinner reservations for them. All of this increased the perceived value of the ticket and experience. We can all do something similar. Do you have a partner that is trying to reach a similar market that has a book? Throw the book in with your offer! Do you have an upcoming seminar or a webinar that you are offering? Throw in a ticket to that with your main offering! Whatever you do, increase the perception of value to your buyers and they will reward you by willingly paying higher prices.
- If you must discount, hide it: I'm not going to say that you never ever will discount, but I am going to tell you that if you must and/or when you must, the big key is that you must hide the discount. Apple does a great job of never really discounting their products. Instead when you see an Apple product on sale, it is always at Best Buy or another retailer. Whatever it is you are selling, if you need to discount the item, make sure you get the discount away from your core brand. You don't want to have the discount attached to your core value proposition. Let a brand that has discounting at its core handle that messy stuff for you.
What say you? Are you addicted to the sugar rush of discounts?
C-Suite Advisor | Helping CEOs, Executives & Boards Achieve Breakthrough Growth & Profits
1yI've updated the OG article for 2023: http://davewakeman.com/2023/01/2023-are-discounts-still-for-dummies/
Registered Representative with New York Life, helping clients achieve financial certainty.
1ySome places discount effectively, and by that I’m thinking of couponing. A coupon is like a call option: You have the right to either a discount or a value add, but only if you exercise that right within a certain amount of time or by spending a certain amount of money, in which case the vendor is obligated to deliver the discount or value add. The rub is, just like how those who trade options rarely execute them, those who get coupons rarely use them. CVS does a GREAT job of this, by providing you with a receipt at checkout as long as a belt, full of coupons for either things you don’t want, or things you just bought! In such cases you either ignore the coupons or convince yourself to buy what you either don’t need or don’t want just for the sake of saving sone money on such items. Free garlic knots with a large pizza? Why not? Just how often do I remember to mention the coupon when I call in my order? Rarely if ever. The trick is making the customer believe they’re getting something of value that is only marginally valuable to the vendor. But offering full priced goods at a discount price, without any accountability or previous buy-in from the consumer? No thanks! Hope you’re well Dave Wakeman!
Chief Marketing Officer
3ySuch a common practice still, especially in B2B .
Professor of Marketing, Middle Tennessee State University
7yDave, great points on the perils of discounting and what should be done instead. I liken the discounting "trap" to the guy at a bar who buys drinks for everyone. He is popular as long as the drinks keep coming. But, when he runs out of generosity (or money), he is not as relevant as when the free drinks were flowing. Similarly, brands garner interest and maybe even realize a short-term sales boost when discounts are offered. The boost can be short lived if the discount goes away or a competitor offers a better deal.
Working to create a memorable experience for fans
7yDave, definitely a great read. I told you of my struggles with going against discounting and free all over. I will sit back and watch as two years from an organization ceases to exist because of this.