Learn why discounting is like hurting your business – Discounting for dummies 101

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It’s always been assumed that discount sales are good for your business, however, have you ever considered, it’s not? The idea of sales and using discounts has been long running, but what if you’re not making the right choice? Just because everyone has sales during various seasons, that doesn’t mean your business has to follow. In the short run, sure your sales numbers will increase. Yet, there is an effect being created on your brand name and the image towards your customers. Whether, it be the Price tag markdowns, sales promotions or vouchers, it may have a negative effect in the long run.

Not Real Sales Numbers

Those sale numbers you see at the end of a discount sale is just inflated. They are only temporary and once the discounts are over, your real sale numbers won’t be close to them. What is dangerous is that discount sale numbers may convince you that your business is doing well. This will result in you implementing poor marketing strategies to improve your real sale numbers.

Brand Devaluation

You may not realise it, but you are devaluating your brand with frequent discounts. The price tag you set on your product or service creates a brand image. If the price is too high, then your product becomes aspirational or if it’s mid level, it will be considered as a budget product.  Discounts slowly erode your brand name and have them often enough, and you’ll find discounts become associated with your brand. So, unless you want to become known for your discounts, avoid it.

Lessening of Customer Devotion

Every brand would love to reach the ultimate level with customer relationship i.e. building loyalty; if not that, then at least customer devotion.  However, with discounts, you’re even putting your customer devotion at risk.

Customers will look only to your products or services when you’re having a Thanksgiving or New Year’s sale. Eventually, they will depend on it and purchase from your brand only when there is a discount sale. Have discounts often enough and you will begin to attract low cost buyers. As your brand devaluates, you’ll find fewer customer returning back to your store.

Profit Risk

Setting up a discount sale is risky because you’re lowering your profit margin and putting faith in bulk sale. If you don’t manage to make bulk sale, you’re discount sale won’t be profitable and your business finances will suffer. This is the only short term risk you carry. Depending on where your business growth has reached, you should consider weighing your profit margin risk verses the products on bulk sale.

Is it Meant for your Business?

Don’t just read the above points and throw out your discounting strategy. It depends on whether its suits your business or not. If you aim for bulk sales, low-cost buyers and don’t find importance in brand name to your business, then perhaps discounts won’t hurt.

However, if you want your business to have a brand name and loyal customers, you should reconsider your discount strategy.

 

Ali Salman is an online marketing strategist who have worked with Coca-Cola, Extreme Pita, Mucho Burrito, KIA, Honda and other Fortune 500 companies. Ali Salman now heads Rapid Boost Marketing - Canada's fastest growing search marketing agency. RBM clients include Fortune 500's and medium size businesses across North America. Ali as RBM CMO leads his team in building and managing quality, high-performing and cost-effective interactive campaigns and programs for our company's customers and partners. In his career, he has significantly improved campaign performance for large brands such as Government of Alberta, Liberal Party, Workopolis, Cathay Pacific, as well as medium to large retailers and high-tech B2B-enterprise niches. Ali and his team develop online promotional concepts that spark viral growth through search and social media for RBM clients, devising strategies that use search engines and more to reach key demographic segments in the ways they're most likely to be receptive. Ali Salman also oversees corporate marketing initiatives for Rapid Boost Marketing, including strategic communications counsel, public and analyst relations and client education programming.

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