There is no doubt that customers love promotions, deals, and sales. After all, who doesn't want to feel like she has gotten a bargain? However, there is a dark side to structuring your company's revenue stream around a constant price reduction. Price concessions are like coffee--they seem like a good way to wake up your prospects, but they create dependency, and they kill the flavor of everything that follows. Here are 5 reasons you shouldn't make discount a part of your selling vocabulary.
Discounts send the wrong message. When you are just starting to build a relationship with a prospect, you should be communicating on the value of your product--not the price. Think of it like this: a customer really means someone who is looking to invest. To do so, he needs to understand the benefits your product or service will provide, rather than focussing on how much or how little he can pay, because it's those benefits he is ultimately purchasing.
Discounts undermine customer confidence. Leading your selling proposition with a discount is like saying, "this thing I am trying to sell you does not merit the price I am asking for it". And while the customer may be momentarily convinced by being able to pay less than full price, and choose to take advantage of the offer, subconsciously, he thinks that you are offering a discount because you are charging too much to begin with, or because you don't have confidence in the true value of your product.
Discounts promote disloyalty. Customers, once exposed discounts, come to depend on them, and your company will likely not be the only one offering them. That means that by building your selling proposition around a price reduction, you are pushing your customers to comparison shop your competitors, and buy inferior but cheaper products, instead of convincing them of your product or service's merit. This race to the bottom will lose you sales in the short and long term.
Discounts destabilize margins. A customer who likes your product enough to consider buying it most likely wants your company to stay in business-- so you can keep selling your product or service, and even invent new ones. Bringing in revenues with the appropriate margins to survive makes both of those things possible. If you sell at a loss, and make no mistake that discounting always means losing money, you are allowing your company to be devoured from the inside out.
Discounts deform your sales cycle. Your revenue stream, rather than remaining stable, may rise when discounts are in play, but plummet when they are not. So while doing it from time to time when it benefits stock management, for example, might work out, relying on it over and over again can create cash turmoil. Having financial highs and lows means potentially not being able to pay for your operating expenses on an ongoing basis. When you discount, you are getting a quick influx of cash, but you are depleting your company's resources and reserves that are essential to its longevity.
Before you think about continually discounting your product, ask yourself what you want customers to remember about your product. Would you prefer to hear your customer telling a friend "Well, I bought it because it was cheap"? Or would you rather him say "I bought it because it was the only product that can do X". If you answered the latter, then you know that discount is a word you don't want used around your product.