If you watch the marketing that major retailers do, and even some online businesses, you might be inclined to believe that offering discounts is the best way to generate sales.
As a marketing and branding expert, and someone who has been profitable in business since 1998, I can tell you that consistent discounting is the quickest way to devalue your brand and hurt the long-term profitability of your business. Unless you want to become known as the “Walmart” of your industry and your goal is to compete solely on price. If you’re a high-volume retailer that may be a viable strategy. If you’re a coach, consultant, or other service professional, probably not the best approach.
Discounting is just one marketing tactic.
It’s also one that should be used sparingly. While you may make money in the short term, you also train your customers to never pay full price. So, you have to offer sale after sale after sale, if you want to make sales.
Discounts should be reserved for times when you want to stimulate sales from a non-responsive segment of your audience or for a languishing product or service, move people who are on the fence, or get people to take action within a short window of time.
The over-discounting effect.
Pay attention to the advertising of nearly every major department store or furniture retailer. Every week they’re advertising a sale. Within the past month I saw a Going-out-of-Business-Everything-Must-Go sale followed by a Grand Opening sale from THE SAME FURNITURE STORE! As a marketer I see it for what it is, a mad dash for instant cash-flow. As a consumer I can tell you it doesn’t build trust. How can it when they say they’re going out of business one week and celebrating a grand opening the next?!
Additionally, I have to wonder if their everyday prices are perpetually inflated. And, if their sale prices are in fact, their real prices. That makes me feel even worse if I do happen to buy something that’s not on sale, because I feel like I overpaid.
For me, this has resulted in rarely paying full retail price at department or furniture stores. Because history has shown me if I wait (and I usually don’t have to wait too long), what I want will go on sale.
How does this apply to Coaches and Consultants?
As a coach, consultant, expert, or anyone who sells their own products and services, you have to ask yourself, “Is this the way I want my clients and prospective clients to think about my business? Do I want them waiting for the next sale to buy? Or, thinking my regular prices are inflated?”
I’m guessing probably not.
Consistent discounting is better suited to commodity products and companies with large marketing budgets.
They have the ability to generate a high volume of sales through broad-reaching advertising campaigns. They make money because they sell so many units. It doesn’t matter that their profit per unit is only pennies or dollars.
Ask yourself how long you can stay in business, and be profitable, if you’re only making a few pennies or dollars per sale. I’m guessing your answer is probably, “Not very long!”
Retail Products are One Thing. Your Expertise is Another.
It’s one thing to consider the ramifications of devaluing a couch. It’s quite another to consider the consequences of devaluing your coaching. The value of your expertise is not something that’s easily recovered once it’s been lost. Additionally, consumers who have been trained to wait for sales are hard to turn back into regular-price customers, even if the regular price is fair.
Pricing is a challenge for most service professionals.
I know it’s something I wrestle with every time I create a new program or service. And, it’s something I see my clients wrestle with as well. It can be difficult trying to determine how much to sell your services for. Sure, you can look around to see what others are charging, but you never know if they’re actually making sales.
The best way to set a price is to determine the value to your customer of what you’re selling. What is the outcome they’ll experience from your product or service worth to them? Then, balance that with the costs of other options available that provide the same or a similar outcome. By the way, this is another reason it’s so important to set yourself apart with a unique brand. If people see you as offering something unique and valuable, and it’s something they really want, they’ll be less likely to compare you to the competition and make a decision based on price. Price-based decisions are typically made on commodities and me-too products and services.
Finally, consider the value of the outcome and your prospects’ other choices and choose a price that feels good to you in your gut. And then, get out into the marketplace and test it by making offers to potential clients and seeing if you get clients.
A few years ago I was launching an information product and debating between three different price points. I decided to run some Google ads to test the different prices, and let the market tell me the best price. Interestingly, the lowest price did not sell the most units. And neither did the highest. The sweet spot was right in the middle. So, while you may think pricing your products or services lower will generate more sales, that’s not always true. In some cases, it may communicate a lower perceived value and result in fewer sales.
I often refer to the pricing method I recommend as “inspired pricing” because it relies on trusting your gut and doing what feels right to you. You’re an expert. You have a sense of what your services are worth. Odds are, if you ask yourself the question, What should I charge for this? a number immediately pops into your head. And, while it’s not a scientific method, it does take into account one very important point: it ensures the price you set is one you’re confident in. And, if I know one thing from all the years I’ve been in business it’s if you’re not 100% confident in your price, you won’t make sales.
You’ve set a price, but no one is buying. Should you have a sale?
The last thing you want to do if things aren’t selling is constantly discount to try and generate sales. What happens if people suddenly buy because you’re having a sale? Does that mean you have to keep having sales, or lower your price permanently? Hard to know because you haven’t tested anything else. And, what if there’s another reason people aren’t buying that has nothing to do with price?
You’re better off trying to find out why people aren’t buying.
Maybe you’ve created a product or service the market doesn’t want. Or, the audience you’ve identified doesn’t place a high enough priority on what you’re offering to actually invest money into it. Too often I see people go into business because it’s something they’re passionate about doing. But just because you’re passionate about doing something doesn’t mean other people will pay you money for it. You have to be sure you’ve identified a need in the marketplace. And, not only a need, but something people actually want… something that’s a high priority in their life.
So why else might people not be buying?
Perhaps your marketing doesn’t clearly communicate the outcome people will get or why they should purchase. Or, maybe you’re not reaching the right people. If you aren’t selling, better to re-evaluate your 4 P’s (What my How to Market Yourself as a Coach or Consultant course covers) to make sure you’ve got the right product, marketed to the right people in the right places, with the right message, and at the right price.
Be careful with discounting and sales.
Both are like salt and should be used sparingly if you want your business to be healthy. Reserve them for celebrating special occasions, new product launches, or other events that don’t happen all the time. Otherwise, if you use them too frequently, you may permanently lower the value of what you’re offering in the eyes of your clients and prospects, and that can have a significant impact on the profitability of your business.
If you only offer discounts occasionally, people won’t come to expect them, and they’ll be genuinely surprised and pleased when you do. More importantly, they won’t wait for a sale to buy something they really want.
It takes confidence to charge full price.
Offering discounts is an easy way to make quick sales. But as I’ve shared, you’re also taking a huge risk with your brand and your business if you do it too frequently. It takes confidence to sell at full price. However, if you truly are an expert it’s important to remember that your expertise is valuable and you shouldn’t just give it away. Yes, you need to charge prices the market can bear, but you certainly don’t need to give your services away.
The more people pay the more invested they are.
Typically, the more someone pays for something the more they value it. When you give someone something for free, or for a very low price, they don’t have much skin in the game. So, if they don’t end up using the product or service, they’re really not out anything. That doesn’t bode well for engagement with your product or service or the long-term value of that customer. After all, if they don’t use what they bought, why would they buy again?
However, if someone pays more (I’m not talking about gouging people, I’m talking about charging a fair price), they’ll be more likely to use the product or service and appreciate it more. They’re more likely to be engaged because if they don’t use what they’ve purchased, they’ve wasted a lot more money and they’ll likely feel bad about that. I’m sure we can all find examples in our own lives of times we’ve gotten something for free, or next to nothing, and never used the product or service. And, times we’ve invested a fair amount in something we really wanted, and how much more we valued that item.
So, if you want to build an enjoyable, successful, and profitable business, have clients that value what you have to offer, and protect your brand and what it stands for, keep the discounting to a minimum.
Use it when you have good reason. And offer your products and services at a fair price the rest of the time.