If you sell anything, whether it is a product or a service, there’s a good chance that at some point you have been asked to provide a discount. Many times it is enticing to offer a discount to secure a new client, or to receive some unexpected work.
But what effect does doing so have on the value of your product or service?
I have seen so many businesses that try to win business by lowering their price to meet the desires of their customers. Many times they do so out of guilt due to a customer saying that that’s all they can pay.
It’s tempting to give in to this at times, but where do you draw the line? Do you just do it for one customer? Or do you do it for every customer who has a similar story?
Rather than offering discounts, you need to offer your product or service at a price that is a good value for the customer, and if you do so they will have a much easier time paying your full price.
It does not matter whether you charge high prices or low prices, what matters is that you are providing more value than you were asking customers to pay.
You need to believe in the value of that what you are selling. If you truly believe that the price you charge is a fair value for what the customer is receiving, you can say no to discounts without feeling bad.
It is only when down deep inside you truly feel that you were overcharging that you end up giving into providing discounts.
But, you may still be asking yourself, “what’s the big deal if I give somebody a discount?”
While it can be easy to think that there is nothing wrong with it, there are actually three ways that providing discounts hurts not only your bottom line, but your brand as well.
3 ways negotiating on price diminishes the value of your brand
- It shows customers that you don’t believe in what you’re charging. Brands that believe 100% in the things they sell, and the prices they charge, never give discounts. When is the last time that you saw Apple having a sale? I’m going to guess you haven’t seen it very often, or ever. The reason for that is that Apple believes 100% that they are selling the best items available for that price. Most people do not expect to ever receive a discount when buying an Apple product. Apple has showed their clients that they believe in what they’re charging. But, unlike Apple there are many brands that seem to have sales all the time. Kohls comes to mind for me. Every time I have ever been in their stores they are having a sale. If I went to Kohls and had to pay full price I would feel that I was being ripped off. They have given me reason to feel that they don’t believe in the prices they are charging.
- It takes something away from the product or service they receive. This may sound crazy, but charging less for something diminishes the value that the customer receives. What do I mean by that? If you buy something for $50 versus buying that same thing for $250, you are far more likely to use it to its full worth if you purchased it for more money. It is the mindset of “getting every penny” out of the item. I have experienced this myself. Times I have spent $50 on a new computer program versus $250, there’s a far better chance that I dive into the $250 program quicker and actually end up using it for the purpose which I bought it for.
- It creates a false price point. I believe this is one of the toughest things to recover from as a brand. Once you have set a price point in someone’s mind is very hard to increase that price point. If your customer feels that your product or service is worth $100, due to you selling it to them at a discount for $100, it is hard to ever get them to go back to the full price you were charging. By giving them a discount you created a false price point in their mind that is lower than that of your actual sales price. If you try to sell it to them for a higher price later on they will always remember that they paid less before, and they will feel as though they are overpaying now. This was one of the problems that many companies experienced at first when using Groupon. After customers came to their business and paid and artificially low price, something that Groupon used to help get customers through the door for businesses, those customers had a very hard time returning to the actual price after the Groupon discount was gone. Instead of leading to gaining customers, many businesses experienced actually losing customers that they had before they offered the sale.
Correctly pricing the products or services that you offer is one of the most important things you can do for your brand.
The key to coming up with the right price, and being able to stick to that price, is to price your products in a way that provides more value than the customer is paying. You always want to leave them feeling as though they “got a deal” at the price that they paid.
Once you have determined the price, based on the value of your product or service, is important to stick to that price. Always. No matter how many sob stories you get, or how many reasons you are given for why someone needs a discount, it is important to always stick to the price you determined.
Doing so will be better for your brand in the long run, even if it costs you a few customers in the short run.