The Case Against Discounting Your Products and Services

Black Friday has come and well, not really gone yet, since Cyber Monday has inspired most businesses to offer their “best” deals throughout the weekend and the Monday following Black Friday.

Chances are, your bank balance is a little lighter, but if you’re one of the really organized ones, the upside is your holiday shopping is complete.

As a mom, our focus this time of the year is first on making sure we get that item our child covets before it’s impossible to find anywhere, and second, that we get it for the best price possible.

But now as the dust is beginning to settle, it’s time to put our entrepreneur hat on and take a more scientific look at how the big businesses operate when it comes to discounting their products and services, and what lessons we can take from their practices.

If you pay close attention, as many bargain shoppers do, you’ve probably noticed the following Black Friday trends depending on the store and the item involved:

- Now is the time to buy, items that never go on sale are truly discounted in a meaningful way;

- Yes, there’s a discount, but it’s no greater than the sale that is usually run by that store or on that item;

- While a large specialty store is offering a rare discount, the item can actually be purchased for that price or cheaper on a daily basis at another discount retailer; 

- There’s no real deal here at all, you can get it much cheaper in January if you can be patient.

While big businesses can get away with all of these trends, as hungry consumers often blindly buy into their advertising, as a small business owner whose livelihood relies on the “know, like, trust” principles, it’s important that any discount you offer falls squarely in the first trend of being genuine.

Why Any Discounting is Dangerous

Especially as someone who’s just starting out as an entrepreneur, before you ride the wave and start throwing out discounts at all the popular times, it’s important to have a well-reasoned strategy behind your pricing and offering discounts.

When you offer up a discount, you’re taking three risks.

First, you’re telling people that your product or service perhaps isn’t really worth what you normally charge for it.

This is especially true if you’re giving a significant discount of more than 20%.

Second, you’re running the risk of alienating the people who have paid full price in the past.

This is a big problem in the online world where prices fluctuate so much anyway.

It’s not uncommon during popular sale dates to see emails go out saying, “Others paid $5,000 for this information, but you can get it for $7 today.”

These kind of “too good to be true” bargains are generally that, too good to be true.

And if others really did pay $5,000 for what you’re discounting to $7, do you think they’ll ever pay you a dime again? Or ever have a kind word to say about your business?

Not likely.

Third, if you consistently run discounts, you’ll train people to never pay full price for your products or services.

Think about it, are there things you wait to buy because you know it’ll be on sale for a certain holiday or special event? 

You’re severely cutting into your profits if your market catches on to your sale pattern, and most of them will. 

Keep in mind that the trends we see in big business are made possible by the fact that they’re big businesses. They likely inflate their prices more than you do, and can afford to take loses on some items more than you can.

And, they can get away with more than you can.

Have you ever felt like you’ve been wronged by a large store, or perhaps you just don’t like their practices in general, but you still find yourself going back? 

Because it’s the most convenient, or usually the cheapest, or you needed other things there anyway, it’s easy to ignore one bad experience.

As small business owners, one bad experience and more often than not, your customer or potential customer is lost to the competition.

How to Discount if You’re Going to

That’s not to say that you should never, ever offer any kind of discounts on your products and services.

Sometimes it makes good business sense, and if you can have $100 in exchange for something of value rather than $125, it’s better than having $0 and getting no customer and no chance of some positive exposure for your business.

We’re trained to love a sale, so yes, there are people out there who will buy just because it’s on sale.

If you’re going to offer a discount on your products or services, consider sticking to at least one of these four guidelines when crafting your special offer.

1. Offer a Private Discount to Existing Customers

This is a great way to reward your existing customers for their loyalty and to encourage their repeat business.

If you don’t have many (or any!) existing customers, you can offer the discount only to those on your email list, or those who follow your Facebook page, or wherever you have your tribe of followers gather. 

2. Create a New Offering Rather than Slashing Prices on an Existing Offer

To do away with the perception that you’re devaluing your services or products, and to prevent any buyer’s remorse on the part of previous customers who paid full price, create a new product or service, or bundle some existing products and services, and offer it at a discount off of what it will be in the future.

You can advertise it as an introductory price, or as a “beta” phase of the product or service, and invite feedback on how to make it better so you can polish it up and offer it for a higher price.

3. Have a Meaningful Reason for the Discount

Instead of having a sale because it’s Black Friday/Cyber Monday and that’s when you’re suppose to have a sale, offer up a reason that your audience will see as a valid or good reason for the discount. 

The beta phase of a product we just talked about is obviously a valid reason for a discount.

An introductory price makes sense, or maybe you’re retiring a product or service and coming out with something new so you’re offering a retirement sale. 

It can also be something more fun like, “It’s my birthday and I want to give you a gift this year, so I’m taking the hit and offering up the same great product or service I always do, for a special discount today.”

Just make sure your discounts are infrequent and that you don’t offer them at the same time every year.

4. Make the Discount Reasonable

Whatever strategy you decide to take, make the discount reasonable.

If it’s too big of a discount you’re going to face all the problems of upset past customers and a massive devaluing of the great work you do.

Will you loss some potential buyers if your discount is 20% rather than 90%?

Yes, you will, but guess what?

You didn’t want those people as customers anyway. They always, yes always, end up causing more trouble for your business than they’re worth.

Need Help Navigating the Entrepreneurial Path?

Pricing and discounting is just one of the many areas in which new and struggling entrepreneurs can get lost in, and make decisions that are harmful or even fatal to their business.

When you’re learning any new skill, having an experienced teacher or mentor always makes things easier. And in business, it often makes the profits come quicker, and in larger amounts.

Kids Party Characters owner Cheryl Jacobs has a passion for mentoring new business owners, especially moms who stay home with their kids or wish they did.

As a mom herself, Cheryl knows you don’t have the time or money to suffer all the bumps in the road and inevitable setbacks that come with the sharp learning curve new business owners face.

In an effort to give back in light of the success she’s found, Cheryl has created an opportunity with Kids Party Characters that helps take much of the struggle out of starting your own business and makes it possible to work from home while raising your kids.

With membership in Kids Party Characters, you’ll get an exclusive territory in which to book parties, access to all the tools Cheryl’s used to build a six-figure business, and step-by-step training on how to start your business the right way.

If this sounds like it could be the opportunity you’ve been looking for, schedule a free, no-pressure chat with Cheryl right here and she’ll give you all the details and answer all your questions.

Want to know more about Kids Party Characters? Connect with us on Facebook for daily updates on the magic we bring to children’s parties, as well as our best strategies for working from home while raising happy and healthy kids.