Should we discount to make a sale?

Pricing is an important part of your brand, whether you’re selling to businesses or direct to consumers. We often assume that people make buying decisions based largely on price. It’s less important than you’d think. Even in large corporate procurement, it’s usually close to a 50/50 split on price and quality/prior experience.

It’s tempting to offer discounts when it’s quiet or to assume that your pricing is too high if someone decides not to buy. 

Often, it’s more likely that you haven’t addressed their needs properly or explained your business well enough for them to have decided to buy from you. People can often find the budget if they’ve decided they want what you’re selling or want to work with you.

In almost all situations, discounting is the last thing you should consider in order to close a sale.

"But they really want or need what we’re selling..."

There’s no obligation for you to lower your prices because someone wants what you’re selling but doesn’t have enough budget. Don't be drawn into bargaining. Once you discount, that customer will always expect the same rate. Many early stage businesses fall into this trap.

That customer may also share how much they paid for your products or services with other potential customers and that could be a problem if that someone then asks for a quote and you quote correctly. Maintain your perceived value (and your margin) by sticking to your guns.

Sometimes people who would like to work with you/buy from you can’t afford to right now. That’s okay. That doesn’t mean they won’t come back to you at another time when there’s more budget or their situation changes.

What can we offer instead of a discount?

If you’re in a services sector, try reducing the scope of the project, or breaking it up into phases — making sure that something of value is delivered at the end of each phase. They still may be able to work with you at a lesser scale, and the phased approach may help them to find the funds across a longer time period. 

Sometimes it’s not about your price even if that’s the reason given

If you’re a new supplier, they may just need confirmation that you’re as good as you seem. A phased approach can be a way to test that and prove your business’s value to other people in that customer’s organisation.

What about strategic discounting to get a foot in the door?

Don’t offer heavy discounts just to win work from a brand or business you want to work with. If you do, it then appears that your original quote was way over the mark to start with and people don’t like that. If you’re an earlier stage business, it can also appear that you’re not confident that you deserve what you charge (particularly if you’re in a services industry). Again, devaluing the perception of your business, service or product that you may have spent significant time building up with the potential new client.

What about limited time only price-led promotions in quiet periods?

This week I saw a well-known furniture company's ad on Instagram offering 50% discounts on fitted bedroom furniture. The call to action below also offered to discount the VAT as well. 60% off?? As it happens, I’ve been thinking that five years after moving in, I could use some wardrobes.

Clicked to request a home visit and the call centre person who phoned back made a point of highlighting that there was 50% off sale, plus another ￡150 voucher for replying via Instagram or something. I thought, ‘they’ve gone promo crazy, maybe the business is in trouble and needs cash?’ Already my view of their brand was heading south. 

I didn’t have a prior view of this brand – it’s a UK-only company and I’ve not been in the market for fitted furniture before. So I started to think, perhaps it’s middle to lower end products – a high volume, low margin type of business? I expected the consultant to be a commission-based sales person, with no deep product knowledge or expertise. I’ve previously tried to purchase blinds and curtains from a couple of well-known national suppliers and had this experience a few times already. 

Customers know that too good to be true pricing usually is

The wardrobe design consultant arrived and was great – not what I expected. He knew his product range, solved all of my space issues and the samples were high quality. Then he gave me the quote. It came out at well more than ￡1000 per linear metre of wardrobe space. He said this was with all of the discounts (which I hadn't mentioned) and a bit more. He wrote the quote at the top of his business card with a flourish and presented it. That didn’t sound like mass market pricing - I was confused.

So, either the promotional ad campaign was purely clickbait (and a breach of advertising standards codes), or this company usually charges more than ￡2000 per linear metre for wardrobes. This may be correct, but their advertising and sales strategy didn’t represent that level of premiumness (and neither did the business card as a formal quote technique). Though I wanted the product, in the end I didn’t trust the company enough to sign an order.

Offering large discounts can damage your brand and reputation, and upset your sales team

Aside from confusing potential customers, offering unrealistic or non-sustainable price promotions will frustrate your sales team. Effectively you’re asking them to sell to unqualified leads/people who aren’t in a position to buy. That’s an expensive use of time and resources, and unlikely to pay for itself in the end. These sales meetings are unlikely to end positively for either party.

Remember, price isn’t everything in a buying situation

As for my lack of wardrobes, I explained that the quote was higher than expected (in reality I had no clue how much it might be), expecting him to try and go for the sale. But he went quiet, collected his samples and left. His mistake was assuming I was making a decision based solely on price. It’s a factor, but I can also be swayed by quality, workmanship and what the supplier is like to deal with. 

I’m time poor, so need things sorted, rather than spending months shopping around for quotes and arranging home visits. If he’d asked me some questions about why now, what I was looking for, what was important to me etc. he would have gotten that information.

Focus on your customers, products, service and quality — that’s your point of difference, not pricing.

The truth is I would have responded to that Instagram ad without the massive discount offer. NEW SUMMER RANGE with some well styled images and ‘Book a free home consultation now’ would have worked just as well. 

It’s all about getting me at the right time, at the right stage of my buying cycle. You can find out when that is by taking time to understand your customers and their needs. 

We could have avoided the reputation-damaging, discounting pantomime too.

How about offering discounts to new customers?

Heavy discounting or loss-leading price promotions can alienate your existing customers and damage your brand too, just ask the banks and insurers. If you’ve just spent a significant amount on bedroom furniture and the next week you see a 50+% off sale advertised from the same company, how would you feel about the price you’d paid and the company? You’d feel duped and less likely to tell your friends and family about your new purchase.

What could we do instead to attract new customers?

If you’re in a higher-end, direct-to-consumer sector and want to broaden your customer base, a better initiative would be to offer interest free credit or timed payment plans to help more customers access your products - but also pay what they should cost. This wouldn’t alienate any current or recent customers who did pay the regular quoted costs. As a business it would cost you less money and goodwill from your sales team too. In fact, you’d be giving them another tool to sell with.

Don’t lose sight of who ends up paying when you discount

Whether it’s your business, or you’re a member of the sales team, when you discount it’s your profit margin that suffers. Look at it as money you’re spending to gain a customer or sale. This sounds obvious, but in the heat of a planning or sales meeting, it can be easy to focus on the figures and not the fact that it’s money you’re talking about.

Price-led customers are not who you should be seeking out

Most customers who make decisions based solely on the lowest price they can find will not convert to loyal customers and will never buy into your business and offering. They’re fickle. They’ll switch supplier as soon and someone cheaper comes along. And this highlights the value of branding.

Price is an important part of your brand, protect it

There’s a reason why Apple products are never discounted. It would damage the premiumness and aspirational aspects of the brand. The attraction of premium products and services is that not everyone can afford them. That is how they retain their status as desirable. It’s also one of the reasons the credit market exists. 

If your brand is strong and your product great, people will pay extra to work with/buy from you. You don’t need 50% discounts or price match promises (particularly if your market position is a premium one). John Lewis are seeing the light on this.

Make pricing a part of your brand, not a sales tool

The higher the transaction amount, the more important trust becomes as part of the buying decision — particularly if you sell direct to consumers. Sell on quality, value, service and trust (and then deliver on it) and you’ll win your business a loyal customer. And make sure the customer experience and buying journey is a stress-free, positive one.

This is how great brands and long-lasting customer relationships are made. Without a hefty discount.