What You Are Really Doing When Handing Out Discounts

Discounts work really well. Just look at Groupon or AppSumo. They've built multi-million businesses based on that strategy. I mean, we all know that feeling of getting a great deal... it gives us a rush - especially if it's a product we had kept an eye on for some while.

Every time sales are slow - especially towards the end of the year - giving discounts is the go-to-strategy for many businesses to ramp up sales. What seems to be ignored is the harm done to your brand by applying the discount strategy the wrong way.

Let's take a look at some of those damages:

1. Devaluing Your Product

You've probably spent lots of time on branding, trying to turn your product from a mere commodity into something unique. By giving discounts, you might actually reverse the process as you're basically selling on price instead of on the value you're providing. Which leads to the second point:

2. Destroying Your Price Integrity

Your customers are smart - if you keep handing out discounts every few weeks, they wonder how you can afford to do so. You are basically telling them, the discounted price is what you should actually pay for this product (so every time you pay the full price, I'm actually ripping you off!).

3. Attracting Bargain Hunters

This point is similar to the last one... but it's another aspect to keep in mind when giving discounts. Your customers quickly become strategic about when to buy from you. Once they realize that you have a sale every few weeks, they just wait for that so that most of your customers won't ever pay the full price. Especially if they can anticipate when the sale is going to be.

With that being said, this doesn't mean that you shouldn't use discounts at all. It's more about the how and the when.

The main point is: have a good reason to give a discount.

For instance, people are used to getting a discount when placing a bulk order. They buy more, so they expect you to reward them. If you do so, it won't have that same cheapening effect on your product as your customers understand that you're only able to give them that discount because you will still make enough profit on the complete order.

Another valid reason would be the use of a deadline... so if the customers buy your product (or service) within a given time period, which could be justified as they have earned by taking fast action.

The bottom line is: have a good reason for your discount, be it a deadline, bulk order, or seasonal occasions such as winter sale, and communicate that reason to your customers so that you don't hurt your positioning and that of your product.

And if you do want to give a discount without really having a good reason to do so... just to get a bunch of customers to buy from you quickly... isolate a single product that you give that discount on... and use that product to attract the new customers who see your other items and have to pay full price to get those.

My two cents on giving discount - hope you liked it.

What are your thoughts?

Hamoon Green