Why discounting is bad for business

Discounting may seem like a tempting solution to generate interest in your services or get products moving off the shelf, however there are a range of problems that come with offering discounts that could put your business at risk.

We’ll outline five key reasons why discounting is bad for business.

    1. It lessens the perceived value of your offering
    2. It undermines future business
    3. It implies you have low confidence in your offering
    4. It erodes trust in your business
    5. It cuts into your profits
Infographic share of web traffic by device

1. It lessens the perceived value of your offering

The old adage rings true that something is only worth as much as someone is willing to pay for it. So it stands to reason that lowering the price of your product or service also lowers the value of it.

This perception of lower value can put you in poor stead for future business.

 

2. It undermines future business

The more you discount the more your customers will expect a discount. Why would they pay $100 for something when they’ve previously purchased it for $75?

Often customers won’t stay around to pay the normal price when your discounting ends, while others may hold out from purchasing until they can get a discount again.

This sets a bad benchmark that can undermine future business opportunities.

 

3. It implies you have low confidence in your offering

When you use a discount, customers may question whether you believe in your own product, seeding doubt in their minds as to whether it’s the right offering for them. They may look to other businesses in your industry that are confident in their products and services, leading to you losing out on business.

 

4. It erodes trust in your business

As well as implying a lack of confidence, when you start to discount it shows that you don’t value your products or services either.

This triggers a question in customers’ minds of whether they can trust your business to meet their needs with a quality offering.

By relying on a discount out of desperation, especially when it seems like a deal might fall through if you don’t, can come across as sleazy and potentially tarnish your reputation.

 

5. It cuts into your profits

Perhaps the most salient point when it comes to offering discounts, you’re cutting into profit margins. It’s important to be conscious of your accounts when structuring and implementing a discount, to ensure you will still reach your revenue goals.

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Wrap up

Customers may ask for deals as part of their due diligence. Instead of resorting to discounting and the problems associated with it, simply answer their questions with clarity and confidence. If you truly convey the value of your product or service, the value of your solution will be appreciated and the customer will likely be willing to pay full price.

When encouraging customers to engage with your business, choose raising your perceived value over discounting. They’ll get the value they paid for and you’ll avoid long-term issues of discounting!

If you want to avoid the pitfalls of discounting and grow your business instead, get in touch with 4DP today!