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What are the potential risks or drawbacks of offering frequent price discounts and deals?

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Price discounts and deals are common sales promotion tactics that aim to attract customers, boost sales, and increase loyalty. However, they also come with some potential risks or drawbacks that you should be aware of before implementing them. In this article, we will discuss six of these risks and how to avoid or minimize them.

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1 Lowered perceived value

One of the risks of offering frequent price discounts and deals is that you may lower the perceived value of your products or services in the eyes of your customers. If you constantly slash your prices or offer generous deals, your customers may start to question the quality, reliability, or uniqueness of what you are selling. They may also become less willing to pay the full price or switch to a competitor who offers a higher value proposition.

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James Burtt ???

Podcasting & Content Marketing Expert | Strategic Brand Builder | Helping Businesses Generate Revenue Through Authentic Content
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This is a really interesting point - price doesn't always correlate to quality or perceived value, but it most certainly can affect those things. I remember, when I was first starting out on my own in business about 10 years ago, that I would often do a new client 'a good deal' to secure their sign-off, but what happened on a number of occasions is that client became 'conditioned' to pay the lower price. It can be (not always though) challenging to go back to a higher price once someone like the taste of a discount! Pricing discounts can set a benchmark for the perceived value of a product or service in the minds of customers. When customers have paid a lower price for something in the past, they may compare all future prices to that rate.

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2 Reduced profit margins

Another risk of offering frequent price discounts and deals is that you may reduce your profit margins and hurt your bottom line. Depending on your cost structure, your break-even point, and your price elasticity, you may need to sell a lot more units to make up for the lost revenue from the discounts or deals. You may also face pressure from your suppliers, distributors, or competitors to lower your prices further or match their offers, which can erode your profitability even more.

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3 Customer expectations and behavior

A third risk of offering frequent price discounts and deals is that you may create or reinforce customer expectations and behavior that are unfavorable for your business. For example, you may train your customers to wait for discounts or deals before buying, which can reduce your regular sales and cash flow. You may also attract bargain hunters or deal seekers who are not loyal to your brand or who may return or exchange your products more frequently, which can increase your costs and hassle.

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Ace Luciano

Sales| Marketing | Outdoor| Hunting | Fishing| Firearms|Nonprofits| Influencer | Advertising
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This. You wind up conditioning your customers to expect you to have a lower price for all of your services by doing this. If you have a successful business, one of the best things you can do is RAISE your prices. The 80/20 rule is always in effect. 80% of your business comes from 20% of your customers. The best thing you can do is get rid of the bottom feeders that are looking for nothing but a discount on the price you charge for your services.

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4 Brand image and positioning

A fourth risk of offering frequent price discounts and deals is that you may damage your brand image and positioning in the market. If you position yourself as a premium, exclusive, or differentiated brand, offering frequent price discounts or deals may undermine your credibility and reputation. You may also confuse your customers about your value proposition and your target market. You may also lose your competitive advantage or differentiation if you compete on price rather than on quality, service, or innovation.

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5 Legal and ethical issues

A fifth risk of offering frequent price discounts and deals is that you may face legal or ethical issues that can harm your business. For example, you may violate the laws or regulations that govern fair trade, pricing, advertising, or consumer protection in your industry or location. You may also face lawsuits or complaints from your customers, competitors, or regulators if you engage in deceptive, misleading, or fraudulent practices such as bait-and-switch, false advertising, or price discrimination.

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6 Customer satisfaction and loyalty

A sixth risk of offering frequent price discounts and deals is that you may compromise your customer satisfaction and loyalty in the long run. If you rely too much on price discounts or deals to attract and retain customers, you may neglect other aspects of your customer relationship such as quality, service, communication, or personalization. You may also fail to build trust, loyalty, or advocacy among your customers, who may perceive you as a transactional rather than a relational partner.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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What are the potential risks or drawbacks of offering frequent price discounts and deals?

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1 Lowered perceived value

2 Reduced profit margins

3 Customer expectations and behavior

4 Brand image and positioning

5 Legal and ethical issues

6 Customer satisfaction and loyalty

7 Here’s what else to consider

Sales Promotion

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