Business Discounting — The Rules of Engagement

Posted by John Park on Feb 15th, 2009
Feb 15

If you’re running a business, it’s pretty tough these days to avoid offering your products and services at a discount.  Everywhere you turn, there are sales, promotions and giveaways to entice the all elusive buyer.  Offering incentives is a good thing but like all marketing endeavors, there are some basic rules of engagement you should abide by to garner maximum results.
Here is a quick refresher for you.
1)  If you sell a product that costs less than $75, use percentages instead of actual dollar figures.  10% off of $25 sounds a lot better than $2.50 off.  There are exceptions like low cost food items but this is generally the rule to follow.
2)  ALWAYS add a time limit.  This creates a sense of urgency to act now.
3)  Offering a product for free when it already has an established value is very powerful.  I am referring to the timeless tactic of “2 for 1″.  Let’s face it.  We just love these offers.
4)  If the product or service does not have a clear established value, you must clearly define one.  What sounds better?
- Buy a coat and get a cashmere scarf for free!
- Buy a coat and get a cashmere scarf valued at $75 for free!
5)  Consider marketing loss leaders.  This is a strategy in which a business offers a product or service at a price that is not profitable for the sake of offering another product or service at a greater profit or to attract new business relationships.  Have you ever walked through Ikea?  Do you remember the large baskets at every corner promoting $5 clocks and desk lamps?
6)  If you offer a service, let them try it for free.  Use this only when you have complete faith and confidence in the value of your service.  Use a white hat (ethical) approach.  Don’t charge their credit card just because they forgot to cancel the free trial.  Allow them to upgrade to a pay service.  Establish a value for what you’re letting them try for free.
7)  If you sell a product that can be sold on an on-going basis, give them an initial purchase price that is significantly lower than your regular price.  Again, you must have complete faith and confidence in the value of your product.  For example, a manufacturer of rubber gaskets might offer a new prospect a significantly low price for the initial shipment.  And, if the new customer loves the product, you now have an on-going repeat customer.  Again, establish a value for the initial purchase.
8)  Don’t be a Business Discount Wimp?  This is what I call the “What would you do?” rule.  Remember, you are trying to inspire buyers to act.  You won’t do this by offering little to no savings and by preloading your offers with cumbersome conditions.  Just ask yourself, “Would I be inspired to act on this offer?”  Be honest.  You know the answer.
9)  Don’t forget the SECOND reason why you are offering an incentive.  The first reason is obvious.  It’s to generate immediate revenues.  The second rule might not be so obvious.  By offering a product or service at a discount, you are initiating a new business relationship.  And if you take care of this new relationship properly, it should garner you many more sales down the road for years to come.  Be careful about being too short-sighted.  In my opinion, the second reason is more important than the first.
Until Next Time…
“Don’t be afraid to take a big step if one is indicated.  You can’t cross a chasm in two small jumps.” David Lloyd George

2 Responses

  1. Ted Moshu Says:

    Thanks! I passed your post along to my marketing group. These basics really do matter. Love reading your posts. Keep up the good work.

  2. Katherine Says:

    Thanks again — always refreshing and insightful!

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