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Sep 2018

To discount or not to discount?

September 12, 2018
Capify Australia

Discounts: do they really cut the mustard when it comes to enhancing your brand’s customer rating? Certainly price can hold a big sway over consumer behavior and purchasing choices. But before you start dishing up large on the discounts, it is important to take a closer look at how customers approach these. Here is a helpful guide on the dangers of discounting too much and what you can do instead to boost your business customer rating.

Good value or poor quality perception?

Everyone loves a bargain but buyers also believe that you usually get what you pay for. So if you overzealously mark down your products or services, consumers will become wary of possible shoddy quality. Consider that every customer has a maximum and minimum price that they are willing to pay for a specific product or service. If you pitch your price too low, your customer may doubt the quality of the goods or services you are offering and disengage. If you over-discount, you risk undercutting the customer rating of your brand and suffering loss of sales while you are at it.

Avoid being pulled into price wars

A well-informed pricing strategy is important to any business. Yet discounting can muddy the waters of transparent product development and pricing data among competitors. Here is where price wars come into play. Say a competitor saw that you offered one customer a radical discount on your product or service. That competitor may not see this as a one-off transaction in response to exceptional circumstances but rather as your ‘business as usual’ price point. Based on that view, your competitor will slash their counterpart product or service pricing to match leaving you forced to further drive down your prices in order to stop customers straying to the competition. Price wars damage your customer rating not to mention your profit margins and ultimately your business.

Look at alternatives

There are a wealth of other ways to enhance your brand’s customer rating that do not involve discounting. Why not pour greater focus on:

  • Clearly communicating how your product or service adds value to your customers
  • Know your target market inside out so you can pitch to solving their problems rather than giving the lowest price
  • Put your money where your mouth is and demonstrate that your product or service has a proven track record of delivering what it promises. Draw on testimonials, case studies, demonstrations – whatever tools you have at your disposal to back up your sales offer with proof

When done right, discounting gives your sales team important freedom to close a deal and your customers that fulfilling feeling that they have negotiated a deal. Yet without a clear strategy to guide it, discounting comes with many pitfalls that can damage your brand’s customer rating. You have many other avenues to explore in order to draw loyal delighted customers to your business, a few of which are outlined in this guide. Need some extra funds to help you super-charge your sales plans? Check out Capify’s flexible range of small business loans or speak to us today.

Or call 1300 760 930 to speak with one of our friendly Lending Consultants now.

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