How discounts hurt you
Posted by Jeremy L. Knauff | August 8th, 2009
Have you ever talked to that one prospect who raved on and on about how his company was going to be the next big hit and how he has huge things all lined up. All he needs from you is a discount, and a big one at that.
Anyone who’s been in business for a while has talked to ”this guy” more than a few times. Most entrepreneurs, myself included, have let their empathy for the guy who’s just starting out get the best of them because we’ve been in their shoes. It usually turns out bad and it’s usually a painful lesson to learn.
That may sound harsh, but you’re in business to make money. There’s nothing wrong with giving the occasional discount to repeat clients or on large orders, but when you do it from the start you create a slew of problems:
- They expect the same or a greater discount from then on
- They’re often they’re the same ones that demand the most attention
- They usually won’t last long enough for you to make a profit
- If you do get any referrals from them, they’ll likely need a discount too
When you discount your products or services arbitrarily, even if it’s because a prospect can’t afford them, you reduce their perceived value which creates long-term challenges for your company.
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August 19th, 2009 at 11:10 am
Your points are excellent! Once price concessions or other incentives are used to make a sale with a customer, there seems to be no turning back. This occurrence seems to be more prevalent in B2B situations. Buyers want at least the deal you gave them the last time they bought, if not better. It hurts profits, it hurts brand equity, and does little to cement long-term customer relationships. Price-based incentives are the easiest for competitors to mimic, so any advantage one gets from lowering priced can be erased quickly by a competitor. Hopefully more marketers will learn this lesson!
Don Roy, Ph.D.
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