Discounting is for dummies – here’s why and what to do instead
If you’re thinking of running a sale or a discount…
…DON’T!
Yes, a discount can create a HUGE spike in sales.
Yes, that huge spike in sales can be tantalizing (especially since everyone and their grandparents are running a discount right now).
But, today, you’ll see why discounting can DESTROY your business.
And more important – I’ll show you what to do instead.
Why You Should NEVER Discount Your Products and Services
I’m especially happy to share this video with you today because you’ll hear plenty of other people preach the power of discounts.
And sure – it might work for right now.
But as I share in the video, watch what happens when a company trains their customers on discounts… and then takes those discounts away.
Now I have a quick question for you:
Have you ever discounted and ended up with a client that was a real pain? Share your horror story in the comments.
Derek: We are a 54-year-old service company that until last year has grown only by word of mouth. Last year we began offering discounts to prospective/new customers only. If an existing client were to ask why they don’t receive a discount, it is because we are willing to make a small investment in a new customer to encourage them to get to know us. If they like us, then the join the long list of existing customers who pay full price. In a similar vein, we spend a substantial amount of money on marketing — money spent attracting new customers, not keeping existing customers. A little like discounting for new customers, right?
Derek,
You are so absolutely right about this. Thank you so much for reminding me to ADD value not TAKE from my income!
I’ve had 3 experiences where I discounted my services. In each case, it was a CLEAR mistake that I now finally have the courage NOT to repeat!
1. I discounted my coaching services by 20% for members of my mastermind. Not a bad decision in many ways as they were already subscribers and I was increasing the Average order value. However, since it was MY time I was discounting, I felt less inclined to give them 100% full on great service. I tried to be conscientious but it didn’t help me feel warmly towards those clients.
In retrospect, I should have added an extra bonus that I don’t offer others. Exactly as per your suggestion.
2. When working purely in coaching, I agreed to do weekly coaching instead of bi weekly coaching for a new client. She was a new mum and a single mum and basically negotiated me by a mix of me needing the business and feeling a little sorry for her.
upshot? I worked super hard for her but as she was a single mum with not enough money or time to focus on growing her business, she didn’t get the result we both worked for. I say both worked for – in the calls anyway. She just wasn’t in a position to focus enough to get the result.
In the same situation in future, I’d use this as a warning sign and probably advise the client not to go ahead with their project as they just didn’t have the time/focus to see it through.
Please don’t take this as anything against new mothers or single mothers etc etc. I’m not trying to generalize. I can only go by the specifics of this case, which is that this person just didn’t have the time, money or mental focus free to pursue her project. Not surprisingly!
3. I recently tried (on the advice of another marketing guru who I generally respect at lot) a tactic of booking in 20-minute appointments for FREE to give people a taste of my coaching. I simply set an hour aside one day a week for this and advertised it to my email list.
I tried this over about 4 appointments.
While I did gain a testimonial from this and a single $120 value coaching session (1 hour), overall I felt resentful to these people for taking my time up without giving me value! Also, it just wasn’t a long enough time to give people clear guidance. Plus in all but 1 case, the people turned up without the clear specific question that I had told them they would need to bring to a short session.
Maybe it reflects the low quality of my email list but I just felt I had found a good way to attract people who were either unfocussed, or were too cheapskate to pay me.
To be fair, I did force them to fill in an application form before booking the appointment so it’s not like I didn’t try to filter out timewasters.
I have instead recently simply refocussed on pulling in leads who have to go through the usual application process and pay full price at the end. I’ve recently gained 3 more clients as a result, all of whom are paying full price, and all of whom seem focussed and businesslike.
Thank you SO much for finally putting the nail in the coffin of the dangerous and erosive Discount “Strategy”. This is a “strategy” I actually feel now is a sure fire sign of a LACK of strategies for building brand value and bringing in enough traffic so there is more demand for my time than there is time to give (thus meaning the value of my time has to go UP).
My next client is in fact going to pay HIGHER prices – But I am developing an online course that I can offer as a bonus to give more VALUE.
Win-win.
Thanks again, Derek, been following you for years and you never disappoint. Keep creating the great content!
Michael
I watched this video again for the 5th time. There is plenty of wisdom in it. I work in an industry where service calls and home visits can literally kill your company. I knew there had to be a better way. So here is what I did.
We had always offered a lifetime in-home warranty covering defects in materials or workmanship. The product we sell is very robust, but not indestructible. Minor repairs and inspection visits to determine whether damage was a warrantable condition were a daily occurrence. I immediately re-wrote our terms of service to include a standard 1 year warranty. I then put together a package that not only included care products for their purchase, but a 5 year warranty covering those repairs we had been doing. We are self insuring it and selling it for an additional $300 per sale. Our average ticket is about $2700. That means we are getting an additional 11% or so revenue on every sale that the customer opts to buy the package. Our penetration on selling this package has been around 20%. It can be much higher, and will be once our new staff is properly trained.
Here is the result of implementing the new value plan:
1. Less service calls. A lot less. This means less hours for service techs and company vehicles.
2. More realistic expectations from customers. By explaining the program and offering it at the time of sale, the customer has a chance to decide if it brings value to their purchase. They are no longer able to get us to return to their homes without cost to them if they do not have the protection package.
3. Additional revenue to grow our business. We are currently averaging about $10000 per month from the program. We are able to take care of problems, big or small for our covered customers, and not worry about the cost. We realize a net profit of about $6500 per month from it.
4. The chance for residual income. Our customers can renew the 5 year plan every 5 years at the same cost they had on their original sale.
5. Better referrals. Our customers are great for that anyway, but when you can take care of a major problem, satisfy them, and not have your hand out…You can imagine what they’ll tell their friends about your company.
In a nutshell:
We were giving something valuable away. We stopped doing that. We re-packaged what we gave away and now offer something better and charge a profitable for it. We are happier and more profitable for it.
Hi,The discount is necessary in every business and you have to manage yourself.Sometimes i discount,sometimes i make price up.Now days all people need discount…..I do not think discount make your product lower value.thanks
I work for a small business, it is 2 years old and consists of the owner, myself, and one other employee. We are on the gulf side of the state of Florida, which is feast or famine – very seasonal. Customers come in every single day begging for a break on our merchandise. We import yard art from Mexico, and the owner spends a ton of money traveling and shipping the merchandise, by the way. I find it absolutely unnerving and tacky when these people ask for a discount. I want to leap across the counter and scream “Walmart had $284 billion in sales last year. Go there and ask the cashier to get a manager, and ask the manger if they’ll cut you a deal if you buy three packs of socks instead of two”.
Because we are seasonal, when it is slow, my boss will sometimes work out a deal, then the tone is set each time the customer and his/her sense of entitlement come back to shop. Yes, thank you for coming back, but announcing at the counter in front of others that “I get a discount on this, like last time, don’t I? I’ve spent a lot of money here”….. UGH!
The next time my hours get cut because sales volume is low, I am going to tell every customer that asks for a discount that his discount means one less meal on my daughter’s dinner table.
Every customer should get the best price.
I just stumbled across this article via a Google search but holy crap, the guys that always come to me asking for a discount end up being the absolute worst / nightmarish customers in the world.
Here’s why: they basically come in with an assumed value on your product/brand based on cheap “competitors” elsewhere on the internet or candyland or wherever else the frig they stomp through. They basically assume that you’re “one of them” but still have some kind of zombie attraction to the the type of business you are running and want your services.
I’ve caved a couple time now and never doing it again. These folks typically turn out to assume that you owe them so much more for the courtesy of them signing up for your service. Yes, they are paying customers, and that’s fine and so I will give them plenty of support, but they are wanting a whole ‘nother level of kiss ass that most people would never assume.
One guy got so bad I just stopped supporting him alltogether. He was literally ripping my support model apart by an unending, constant bombardment of emails and I “fired” him from my service. The dude would take a shower, walk his dog, eat some yogurt, come back and write me 5 paragraphs each and every time. Couldn’t take it anymore, and I am a guy that provides ALOT of detailed support every single day.
All this because I gave him half off. How stupid can I be?
Anyway, Derek, sir, thanks for the confirmation. I like the bonus idea.
I run a liquor store and have people asking for discounts several times a week. I don’t give discounts except to customers who buy large quantities, e.g., cases of wine. When I’m asked for a discount I just say no, we try to give our best prices to all our customers, which is the truth. I know some of our competitors offer discounts and we may lose some business to them, but I accept that. How can I cut my price for one nervy customer who asks for a discount when there is often another standing in line behind him who I will expect to pay full price?
Military people are the most likely to ask for discounts. It’s hard for me to see why they think they are entitled to discounts when they are at least gainfully employed, and some of our other customers are unemployed and paying for their purchases with coins they’ve scrounged up.
This is excellent but there are some industries where we are forced to give discounts. In Kindle Self Publishing on KDP, many books in particular genres are priced at 2.99. Discounting below that helps with getting reviews and thus improves your rankings.
But I love the point about adding value. I completely agree with this!
He’s basically saying add something on rather than offer a discount… It’s kinda really the same thing… I work for a thrift store and every week we put out merchandise and offer a discount and you know what we do $5-10k in sales a day… The new merchandise is not discounted, and the the only stuff that is has already been sitting on the sales floor for 3-4 weeks. The key is the happy medium. A good overall price, one that is good to where a customer won’t want to wait to see if they can get the item at a cheaper price. when your items are overpriced, people will only shop when they can get a discount, but if you never offer a discount you may go out of business because your items are overpriced. Aeropostales store is always 30-70% off, and they have extra discount promos too. Honeslty you’re not really “discounting” when your items are overpriced anyways. So the new strategy is to “always be discounting overpriced merchandise”. Art van advertises that their furniture is 60% off when in reality it’s 60% off their “compare at” price not the price they’re selling the furniture”. No one is paying 100% for anything unless your product is “the crystal” when people can easily find something else… i always tell my associates when they are pricing merchandise when it’s too high that “it’s not that cute, and not that important”. You want 100% price paid then you better have an awesome product at a competitive price. I buy organic food because the products truly ARE better than the alternative. I don’t even think anymore about the fact I pay 6.99 a lb for grass fed beef vs 1.99lb for the alternative. The taste and quality is there, and the only discount I get is for buying in bulk!
Very good advice, Derek. I rarely do it, but sometimes will to jumpstart sales. I have a totally unique item with strong intellectual property that no one else can sell, so there’s no competition anyway.
I tried to do a buy one, get one free in Shopify, but could only do it as a %.
I’ve really been struggling with getting what I do off the ground. First off the niche is extremely tiny. Comic books are a generalization in my case, mine are computer rendered using computer animation programs and as yet, not widely accepted, but they have all-ages appeal that families enjoy. Because of this, I’m an independent creator working a very small market. I know there’s potential with the comic books and adding to that, I make soft action figures.
I have been trying the discount thing for a couple weeks and sales have been nil. Everyone loves the daily feature of something from the store on the site, though. Those that do buy stuff from me, generally get it at full price. It’s rare they use coupon codes despite having them.
Anyway, I do agree the discounting isn’t such a hot idea, but I’m not sure what kind of value I can put in its place. Should it be a sample of the comic books, a mini-comic? Paper dolls? I actually want to keep the daily feature idea if I can, just skip the discount and do something else to encourage the sale.
I know there’s potential for what I do to be successful, but I’ve been trying for a year and a half to stabilize and get a decent, effective marketing strategy in place. If I could just get things started, I could afford to get some real serious help, but I need the help to get things started! I’d really like to stop chasing my tail and get the ball rolling.
Really loving all your blog posts and videos! have been hooked for the past few days. You have already changed my perspective on a stack of ways i do business.
So true Derek, discounting means pulling your products down from the original level. why would you do that? that’s the question you should answer before doing a such thing. in the business world its called “cannibalizing your own spring”, you make people think that your product is not up to the standard that is so wrong. nice article btw thanks for sharing with us, cheers!!!
You keep on repeating this. But it is something that’s hard to fulfill for most business owners. That’s because the number of sales is usually vital for every business.
Hi I read the comments here and they are very interesting. I am a Massage Therapist so can you guys look at my site and give me some feedback? I would love that and I promise no to be defensive, because I know that I can be.
Thank you
You can not survive on the web with out discounting. Every enterprise and small retailer who is successful on the web. discounts. If you have no customers you have no problems (or pains). Your blog was TL;DW sorry.
“Have you ever discounted and ended up with a client that was a real pain? ”
Yes, every single time I discount..
I own a home improvement business, and have a few hundred customers a year.
Often times people will tell me after receiving my estimate “We like you the best, BUT received lower quotes. Can you come down a bit”
Sometimes to get the job I would say yes, but this always leads to problems.. It is almost as if they lost respect for me, and then make more and more demands once I am midway through the job.. They are slow to pay me once I am finished.. They are unreasonably picky.. They call me repeatedly to rush me so that I finish ahead of schedule..
Long story short, I learned not to discount or negotiate my price any longer.
This year, I also did a “first time ever” Black Friday through Cyber Monday sale (that is, discount). It definitely was not a winner in terms of sales as a direct result, but it did give me a reason to send out an email blast (i.e. no cost except my time) to my customers, and I ultimately did get several sales at a non-discounted price after the sale had ended. Derek, I will definitely take to heart what you propose, and next year I will offer a “freebie” with purchase instead of a discount. Thanks for the great advice.
Yes I dare say it… I GAVE A DISCOUNT lol but at that point in time I did believe I was doing the right thing on behalf of my customer. And had not see it as demeaning the value of my service. Now I can see. I still have this particular customer however, there is a little angst between us as she still believes that she is entitled to the discount which is now void.
Thank you for sharing this with me. 😀
I hate offering discounts – I’ve always felt that they cheapen my handmade products. WOOT I now don’t need to feel guilty about practically never offering my customers any coupon codes.
I have a funny story about a rather tacky customer and my non-negotiable discount policy. She wanted a discount on a 3 piece “set” of items. I do a “set discount” if someone orders 4 matching items from a handsewn costume collection. Trouble was, what she wanted was actually 2 pieces of one set, and one piece of another (made from different fabrics.) She asks, in different ways, and in different conversations on etsy, no less than FIVE times if she can have this discount. She tries to haggle with me by naming a price for her order that is more than 25% off the asking price. Five times I turn her down, always politely. The last time I decided to take the time to explain (still very politely) that I am not a flea market, and that there are plenty of people who are happy to pay full price for my designs, and if she doesn’t think they are worth the price I charge, please take her business elsewhere!
In response I get friendly business advice. Apparently she sells “hairbows” at her local craft shows. When someone asks for a discount, she gives it to them. It’s the cost of doing business, and it’s good business.
I still congratulate myself for having the fortitude to just delete her message, and NOT send her a scathingly sarcastic reply.
Hi Derek,
More really good advice. In my business a lot of companies discount above ground pool products. In fact they all do and it has hurt the whole industry. I have taken my discounting down and opting to advertise all inclusive and more money for my services. I want to own the field I am in by offering best in class service not discounted services.
Thanks,
Dave M.
I’m with you on this one. I’ve offered early bird discounts to my classes in the past, but I decided to quit that and this video confirms why! I was really pricing them based on most people paying the discounted rate and training people to look for that.
This time I’m offering a bonus of a cookbook (related to the class), but I’ve got other ideas to test in 2014. One of which is donating a portion of sales to charity (also food related). I’d love to hear if others here have used that idea?
Date and time stamps would be helpful on these comments since I’ve subscribed to this entry and each time I get an email, it’s impossible to tell which comment is new.
I’m the King of discounts, sometimes it seems like the only way to get a new client and it really cheeses me off.
Great, sensible advice, Derek. Thanks, will share with others.
Hi Derek,
I’ve worked at a couple of retailers in Austraila, one who learned this lesson the hard way (after 60 years of business they closed down in 2011); by constantly discounting, all you ever get are discount hunters, (like at JC Penney). Funny thing was, I learned that giving a customer an add on with a full price item was a much better way to get them to come back and pay full price. Similarly, I worked as a manager at a big box retailer and always found that giving a customer a free product for them to try out was a great way of building rapport and getting repeat business, adding to the lifetime value of the customer
Yeah. I do a lot of discounts, and I notice what it does to customers. I sometimes have people actually tell me they’re delaying a purchase waiting on a discount. Most of these people don’t buy when the discount is available. It’s hard to walk away from the sales spike, but I like the idea of adding something rather than reducing prices.
So I guess I need to stop offering discounts. It’s gonna be tough (they’re definitely addictive). I will pretend you didn’t call me an idiot 50 times in this video. LOL
Later…
Okay Derek, I couldn’t view some of the comments and responses above (not sure why) so if this is redundant, sorry. I love where this is rooted and actually agree with it, but I would like to know how ‘adding value’ is different than having a sale as it pertains to people only purchasing your products/services, etc. when you do which ever specific thing? What I’m asking is, if they’re only going to purchase when you have a ‘sale’, aren’t they also only going to purchase when you run a ‘promotion’ of “here’s my full price stuff, but you get this ‘added value’ for free”? And, how does that look? Does it discredit the items you added for free as not-so-valuable, or does it bring more value to these items, allowing you to offer them for a fee on your site after your ‘added value’ promotion is over? And, how does this pertain to physical items, not services, that may be ‘old’ or going out of style, etc.? I just offered a huge end-of-year sale on my shop to clear out inventory (I really wish I would have watching this video first!!!) and I’m curious as how I can turn my ‘error’ around and start fresh next year by marketing smarter, as you suggest?
If you never discount the items, it adds value to them. If you can for example afford to hold on to some of the slow selling inventory until it comes back into season, add it as free add ons to the next seasons’ sales over a certain $$ value or just add it on to a certain $ value sale of the new stuff the following season. It’s much better to invest the cost of the item in a sales spike on high profit lines rather than selling it at a low price and not getting the high margin sale in the first place. Remember, discounted stock takes up the space that full price stock could be filling.
Hey, Derek
I’m curious how you feel about giving a discount in exchange for a survey. A customer’s opinion is very valuable, and to reward them for their time gives them incentive to participate. But would you advise against that and, instead, give a freebie, maybe?
Derek,
I LOVE your frankness. I am learning a lot from you and being entertained. Hey, a great combo.
I am a freelance writer and a mental health counselor. I tend to lean toward a bleeding heart. But boy have I learned my lesson. Clients who want discounts also want my soul and home phone number.
No, no, no. It’s a valuable service I provide. Worth every penny and more. I can refer you out if you’d like cheaper or free.
I have had to really set limits with public speaking. I do two per year for free. Period.
So, thanks for the frank info.
Sincerly,
Reba, M.S., LPC, Freelance Writer
http://www.whatwouldrebasay.com
I ran a black friday promotion this year – buy 3 – get one free….that performed VERY poorly… and resulted in a higher than usual unsubs from my list. Yet the week after had more sales than usual. Lesson learned.
My ideal customer could care less about black friday… and don’t annoy them with extra promo emails during this already hectic time or they’ll go away.
My biggest takeaway today is to find ways to add value instead of lowering price. That’ll help keep my margins up.
A question for the group:
I wonder if split testing value-added offers would be a good way to not only increase sales but to test ideas for future products?
For example, what if I made two minimum viable products and offered them as value-adds for a limited time, split testing to see which value-add generates more sales.
Do you think the results would be valid? Would I get reliable enough data to learn which MVP to take to the next step of development?
Anyway, it occurred to me we could use value-adds as a way to research potential new product/service ideas in a limited scope way.
I never give discounts i only increase the prize (rise up). discounts=needy
Hi Derek,
Why I am I not able to see my comment that I posted yesterday!
Great video Derek. I absolutely agree. A great example of this is holiday shopping. I know people who don’t buy things throughout the year just so that they can get the discount during the holidays. Half the time they don’t even end up buying.
Hi Derek, Thank you for this insight!
I stopped giving any discounts after I read one of your articles where you said its better to give 2-3 options than offer discounts. So I give 2 offers with the lower one being the fee that I am actually looking for. So mostly people go for this lower Fee as they find it appropriate for them, yet a tiny percentage of people also opt for the higher fee where I offer them little more of my services .
I’ve seen two commonalities in clients who have come to me at discounted rates. 1. is that they aren’t my client anymore, for whatever reason. and 2. is they seemed skeptical about what I have to offer. Both of those suck.
I enjoyed this post very much! Instead of telling you a horror story (I have a few ’cause I’m on retail), I’m gonna tell you that saying NO to give a discount is Wonderful! I feel victorious when I close a deal with 0 discount.
SO true!!! When I started my skincare + energy healing business, I found a majority of my clients through running daily deals…one of the last ones I ran was with GroupOn, which was by far my most lucarative. However, I started seeing the same clients who had purchased previous deals which I ran through other companies. And *then* I had one client email me asking if I was going to be running another deal soon. By this time I had wised up and told her “no, I don’t have any plans on running a deal.” She scheduled an appointment anyway (yay!).
I’ve found that the clients who truly value my services continue to see me and stay on my mailing list…while the others who are just looking for a deal have disappeared off the face of my planet — not coming to see me, and either not opening my newsletters or unsubscribing.
But now the ones who do remain on my mailing list — since they came to me with a huge discount the first time, that’s what they expect now. Even in offering bonus services on top of a full-paid service, they’re pretty unresponsive (with the exception of clients who did book).
Regarding that, the unresponsive ones are likely not my ideal clients. They came in during a time when my message was not clear. And while I’m still really clarifying my message, I’m definitely more clear than I was before — I do more than skincare; I have a holistic approach, helping my clients unlock their confidence to take control of their life + beauty care.
These clients who bought the deals were interested in the simple quick fix/maintenance facial. So, my new offers, which include bonus energy healing does not appeal to them (even when broken down into a newbie explanation).
Anywho ~ point of this long comment: yes, discounting definitely does damage!
I have had a similar experience to yours. I find when you run discounts you are automatically making the price an issue and even making yourself look cheap.
I haven’t watched Derek’s video yet (listening to something else ATM) but I’m curious to know what he says. I have taken the step of removing all and any mention of pricing from my site because I only want to attract people who can afford what I offer.
I want price to be the LAST thing we talk about, as this will show my funnel and filter has worked successfully in keeping the skinflint time wasters away. As soon as you offer any kind of discount, people either try and get a better discount or argue they cannot afford it.
“Cheap” prices = cheap customers. At least that is my experience.
Nice post.
I definitely think people think too short term. Long term is where is it at.
Thanks
Yeah! I totally agree with the whole discount thing!
If you are putting out high quality stuff, people are willing to pay good bucks for it!
So stop discounting!
YARG!
Don’t discount! Add Value Just signed up for your posts.
Hi,
I’m a teacher of the Alexander Technique, a one-to-one training on how to use yourself better to avoid and overcome back pain, RSI etc.
In my profession clients usually pay at the end of each session and then book another one (or not!). To encourage longer term commitment and allow me to get more money upfront and in the bank I offer a block booking of 6 to get a 7th session free.
I’ve found this to be quiet effective as it encourages retention and saves me looking for new clients so often. It is a discount, obviously, but somehow I feel it’s a “legitimately” useful one.
Ideally I’d like an offer like this to be 10 for 9, but feel £450 upfront maybe too much for clients to swallow, AT isn’t well enough established yet to command that.
what are your thoughts on this?
Great stuff, as always!
I’m curious if you think this also applies to businesses that sell products that have few repeat customers due to the product’s longevity (i.e., the product last for years so a customer might not come back and repurchase anytime soon).
I’m selling a fairly expensive golf product that’s going up against brands that people recognize and love so I’m considering discounting to get some attention, and to make my price seem less risky for an what is an unknown product to them. Tricky.
Cheers.
This was a fabulous video by the way. I made the mistake this year of running a groupon for new members of my practice. What a mistake that was. I think of the 50 patients I received only 2 signed up for longer term care based off of my recommendations. Even though several of them left me great reviews on yelp or other media they still had little to no value for my service and were not willing to pay the amount that I charge for an office visit.
I am going to look into generating more value to my services rather than training people to expect discounts.
thank you!
I posted a comment a few ago but not sure it went through.
My question was on how and where to implement it. I’d love to here everyones thoughts.
While researching analytics I came upon a use in the wild here at LunaMetrics:
http://www.lunametrics.com/blog/2013/07/22/seo-measurement-mistakes/
“Last week, I sent an email to my fellow LunaMetricians asking one question…”
Hey Derek.. it seems you’re receiving your trunks in time every month.
For the Video.. Great advice. We in fact just discounted our couple of products and after watching this vid. It totally make sense to not have discounts.
Now when i think of it. I realized that Apple never did any discounts and may be thats why they have such a huge Brand value.
Thanks again for sharing this.
Btw the pocket square looks cool.
This post sums things up quite nicely. Discounting seems to be the knee jerk reaction most people take to try to draw in customers. And you’re absolutely right about the fact that people will become accustomed to getting discounts from you and will likely not buy at full value. Keep doing your vids, I’m learning a lot, and integrating it into what I’m doing.
Cheers
Great stuff..D, What about “Deal of the day” sites?
Derek you are the man.
Whenever you decide to travel get your ass down to Australia and we’ll have a beer 🙂
I would love to have you look into our Facebook page BIWI. (Because I’m Worth It) I will share this clip to its members (Magicians, Illusionists, Ventriloquists, and Jugglers that work towards getting our rate that we deserve.) Thanks Derek.
Derek,
Very provocative, but do you have to use the word “never”? Seems extreme to me.
David
Hi Derek,
what about if you’re a re-seller who is not creating the value, merely a middle-man between the creator and buyer?
What are your thoughts in that situation?
Other people sell the same things, maybe they are discounting the products.
Thanks,
Dave.
I just found my answer in another comment.
I thought the same. Great! Thank you
Thank you, Derek, for the great advice.
You are at presenting information and explaining.
What if I would pre sale a course. Before I would launch it. Say it would be 50% off until the launch day only. And after that date it would never everbe at this discount or any other discount ever again.
Would the be ok? It is in a way “launch price”…
Derek,
Your videos are always filled with value! This one was no exemption. Great Topic.
Question though- What about Deal Of The Day Sites?
Avoid them because of what you just talked about.. or are they good to use in the begging for a low barrier offer?
Any clarification would be awesome. Thanks D!
Thanks
I agree/disagree. For life coaching, not discounting makes sense. And using discounts sparingly for a small independent retailer, sure.
But when you’re talking about a multi-million dollar clothing or grocery retailer… good luck. A markdown strategy (apparel) or promotional strategy (grocery) is integral to the business and achievement of profit targets. And yes, it’s a trained behaviour to a certain extent but what grocery retailer is going to go first and eliminate the paper flyer and sale items.
For apparel retailers, often when they are discounting they are trying to incite revenue/aka cash flow to manage their open to buy effectively. If they stopped all of a sudden, a la JC Penny (who totally didn’t understand their customer properly before they made that change), many would erode their customer base and possibly go bankrupt.
So yes, agree with Derek for non-inventory businesses like life coaching and training but for retail, I encourage him to meet with “the Walmart” and asked them to stop marking down their 100,000 SKUs.
Derek you are amazing – But I am having a difficult time like Dick Foster where he quotes you from your sales page:
“As a fair warning, I plan on increasing the base price of this training to $199, but if you enroll in it BEFORE Friday (Dec 6), at 11:59PM Pacific, you’ll get it for just one payment of $99.”
Did I miss something here?
You obviously didn’t read my response ;-).
That’s not a discount, that’s an early mover advantage.
One of the best ways for business owners to solve the discount dilemma is to set up a unified discount program. For example, you could give all customers 10% off on orders totaling more than X amount of dollars. Having a pre-existing discount program allows you to treat all customers fairly and saves you from having to make markdown decisions on a case-by-case basis.
Hey Derek,
Just curious… If you are anti-discounting why are you offering your “Start Your Blog Right” for $99 on Dec 5 and 6 at 50% discount? What is the added value?
From your sales page:
“As a fair warning, I plan on increasing the base price of this training to $199, but if you enroll in it BEFORE Friday (Dec 6), at 11:59PM Pacific, you’ll get it for just one payment of $99.”
I love your stuff, but I don’t get this one.
Hey Dick,
It’s not discounted. When I release a course for the first time, I always reward early movers with the best price. Allows me to build up the case studies, and etc.
Well, dayum. You just made the decision for me. Thanks SO much for this video.
Derek you are so right on….I actually wrote an email about this on Cyber Monday.
I used to actually sell mens suits at JC Penny and the only time someone would buy a suit at full price was if they needed it that day for a funeral or something. If it was not on sales our sales tanked.
I saw it in the automobile business in th 80’s and 90’s too and it kind of continues today.
They are always running sales so why would anyone buy at the sticker price…
Thanks Derek for pointing this out to your audience…
With all due respect, Derek, but I beg to disagree. It’s still the law of demand and supply that works in the market right now.
You can offer all the discounts known in the marketing world but without a demand for your product, your efforts are basically useless (see Commentator#1, Amy).
Same is true with adding value. If, for example, one company offers an expensive ho-hum WordPress theme then gives out a free skin for that theme for a limited time, if there’s no demand for the theme itself, how many people will shell out money for that?
In a highly competitive market (for example, web hosting), given all things constant, more people will buy a discounted web hosting package at one company than pay full price at another webhost. Those who do not really plan on buying a hosting account but sees a limited time discount will be enticed to buy one (case of lower price increasing demand and how limited supply affects the market).
In your example of JC Penney and Walmart, I think it boils down to the pricing of the products that they offer. In my case, I saw a $60 baby dress at JC Penney that’s being offered at 50%. Did I buy? No! because I saw an almost same quality baby clothing at Walmart for $18.
It’s imperative for every business owner to find that pricing range where people will buy their products. That’s the only way they can really take advantage of spikes during discounts and limited time offers. (demand = supply)
Hi Techie She,
I understand what you’re saying about the market setting the price. And you’re right about that. It’s vital to put your own product/service into the context of the other choices your prospects/clients/customers have.
But with due respect, I still think Derek is right too.
This raises a few issues. None of which, I believe, mean you have to discount your prices.
1. Quality
If you found a similar quality item at Walmart as at JC Penny, the issue is quality – price relationship. In other words, JC P wasn’t good value at the main price because the quality was obviously the same.
Their price was too high. Agreed. Discounting, however, I don’t believe is the answer.
I guess the solution is: make sure your product/service is of clearly better quality in some way than the competition.
2. Value for money
as above – make sure that relative to the price point, you give better value than the competition. JCP obviously didn’t do that.
3. DIFFERENTIATION
above all, if your product/service is so undifferentiated – either by the niche you serve; the unique services you offer; or the unique personal/corporate brand you’ve created – that you are simply shopped on price, you’re done for anyway. You’re always going to be pushed to low prices.
Again, the solution is not discounting IMHO. It’s differentiation.
Thanks for raising an interesting topic!
Derek – Others are correct, the suit is working for you. 🙂
Thank you for yet another wise, witty and insightful video. I have been up and running for only just over a month now and just yesterday tried my very first Facebook offer and like others (above) I regretted it very quickly. Three things stuck out for me:
1. I am devaluing my jewelry and art in the eyes of my customers and in my own eyes also. I felt a bit icky and should have listened to that.
2. It cost me money and while it reached a large number of people, 5450, (for me at least), only 4 people ‘claimed’ my offer and that has not translated to even one sale yet. Also, only 5 people ‘liked’ my offer and WTF does that mean anyway?
3. When I asked myself why I did it, I had to admit that it was my own insecurity and impatience with respect to my business getting off the ground. And, while that was hard to admit I’m glad I have crossed that bridge.
Now I will move on. Lesson Learned.
p.s. I do offer free shipping over $75 and have lots of ideas for added value. I shall put my efforts there.
p.p.s. One of my favourite online experiences takes place at lego.com – where i often go to buy presents for birthdays, etc for my kids and my husband. They offer free shipping over $75 and they have the occasional added valued (tiny teaser sets). As an entrepreneur, it pays to be attentive to the shopping experiences you enjoy and learn from them.
Great timing! JUST having a convo w/ my husband about sales we could run in our respective businesses.
Thanks for the tip on what to do instead. Add value… Much better!
We have in the past had a groupon promotion as others have stated it was a disaster. All new customers came did the course and some even stole equipment. Never seen most of them again. Crazy stuff. Never loose equipment with my regular customers.
We just had an Open Day at our cooking school and offered “if you book into a class today you will receive a $20 voucher toward another class or stock purchase”. What do you think of that sort of marketing. Is that discounting or offering an add on? Seems a fine line to me.
Bec
I’ve been feeling like I work too many hours for too little lately, and have been wondering about increasing my rates and no longer offering discounts for my hourly rates. This video really drove home those thoughts, thank you!
Right on Derek! This is an absolute bug bearer of mine, having worked in retail and also an industry that is seemingly more and more fickle, thinking discounting makes sales. Like you say; it does… in the short term! However, it’s the most unsustainable promotion / sales tool!
The only time I’d advocate a discount is if it is relevant, targeted and includes a timescale. And ideally there will be some kind of support from your supplier.
Also… on topic, here in the UK this is on TV soon http://www.channel4.com/programmes/dispatches/episode-guide/series-140/episode-1
Amazing tip! This confirms my theory that free is not perceived the same way as cheap. Free is good, cheap is bad. Free builds a relationship, creates desire and trust; cheap makes us perceived as ordinary bitches.
As I told you by email, your blog is my number one.
I can explain why your blog is so good in one word: atemporal.
You’re not posting crap every day just for the sake to post something. You are creating atemporal content – future proof. This is only possible because you are mixing psychology with marketing. You go to the core, you talk about the foundations of things, not just superficial content that is outdated within a month.
P.S.: Not showing posts and comments dates is a very smart strategy.
What about adding value by using a discount to encourage people to do something that’s more valuable to you? I was thinking of offering anyone who signed up for my newsletter a one time only use (per email, even if they try unsubscribing and re-subscribing) and unannounced coupon code for my web store that’s good for only 24 hours.
My thought here is that by not promoting this publicly, it serves as something extra that people didn’t know they were getting when signing up to the newsletter. It further gives them incentive to check out my store (and lets them know it exists) and encourages an impulse buy as the coupon is good for only a very limited time.
At the rate I was thinking of discounting, I’d even be perfectly happy to continue giving any newsletter subscribers that discount to keep them around. Newsletter subscribers are far more important to me than having those subscribers pay full price on items.
Further, it gives something extra that helps make the newsletter people feel a little more “special”, getting something that nobody else gets but them.
I would not announce the fact that newsletter subscribers get this anywhere, as that would just encourage everyone to always go for the discount using 1-off email addresses.
By giving the newsletter people frequent discounts, I’d also hopefully discourage people from signing up under multiple email addresses to continue getting coupons. Not that this would be all bad, as my subscription numbers would look better, and there is some value in having a newsletter that has huge numbers publicly, even if the open percentage rate gets lower as people do this.
In the end, I’d definitely lose some money in that my newsletter people would always expect that discount. But I’m fine with that subset doing that. My newsletter subscription numbers are far more important to me.
Thoughts?
Hey Derek, thanks for the good stuff you do, I wish I was back in NY so I can look you up.
Anyway, what do you recommend for retailers who compete on selling apparel. For example, if sell a blue hanes tshirts, how can I add value? Right now, I’m discounting my items in order to compete since hanes tshirt, you can get it any where right? For items widely sold, what is the competitive edge?
Hey, thanks again, love your podcast as well.
Hey Derek, great video!
I was always taught that the best kind of discount is a pre-increase discount. So, instead of dropping your price, you increase it. Then you let people know that there is only XX amount of time before the price goes up to the newly revalued price.
When I have discounted my services, probably 75% of time it has ended in a project/client/situation that I wasn’t happy with.
Hey Derek,
So what would you do in a retail situation? What could the added value be?
You gave J.C. Penny as an example, what would you have done differently or what would you have offered shoppers?
I’m curious about this as well. While I totally see discounting services as a BAD IDEA, sales are kind of the name of the game when it comes to retail/products. And what about old stock that you want to clearance out? What’s a non-discount centered way to do that but still make your money back on those items?
Exactly Megan!
I know some of the big name brands hardly discount, like Apple & some clothing brands, except on a really big holiday, if that. Then there are those that NEVER discount, but I’m not sure everyone can get away with that.
Amen!
Hi Derek!
I had one student call me after one of my discount periods had expired, and she was extremely mad at me for not giving her the discount anyway. Since then, I don’t discount anymore.
I own a Pilates studio, and I have a reward system. So students get rewarded for taking classes, by earning points. When they have enough points, they get a free class.
And occasionally I offer an additional class on the schedule for free (additional value).
I myself recently signed up for a pretty expensive home study course, and about 2 weeks after I had purchased for full price, I got an automated email from the same provider that would have given me a 25% discount, which was significant. I was really upset that I had just bought for full price.
Thx!
Hi Derek,
We have this problem all the time in Real Estate. The first question out of most peoples mouths is how much do you charge for commission? People think they are getting the same service, knowledge and negotiating skills, basically that all Realtors are the same. This is not the case at all. Usually paying the higher commission Realtor will net the person a higher price for the home and upon closing the seller ends up with more money in their pocket. I am always searching for new ways to offer more value. Of course we have more training, offer free guides and reports as well as are working on a loyalty program all past clients will be offered which will put them in a quarterly draw for a weekend trip to Vegas or a local spot Banff Alberta (stuff like that). If you discount you never win as there is always someone else willing to go lower. Look what happened to Kmart vs Walmart.
Both in my personal business and in others I have worked with, it is my experience that the clients receiving discounts have demanded the most time and effort, expecting more for less, with less appreciation.
Agreed! Instead of discounting add more value. I’m in the consulting business and I give away my coaching If they buy now. But the products always stay the same giving them a stronger call to action. Thanks.
I learned not to discount from my previous business, now I also put bundled offers together.
Works wheel.
Reeeeeeeeealy wish you’d posted this video BEFORE Black Friday. (I needed quick cash, so I ran a deep discount, and got a HUGE spike in sales… but now I’m panicked by what you’ve said.)
Any tips for digging out after making this kind of mistake?
Thanks for this great info. I actually ran an ad based on your podcast episode from Pat Flynn with this idea. Good to see the video now.
Regarding people asking for discounts, I used to get it all the time when I was a wedding photographer.
I hated it!
Often, people would see my prices and go to the cheapest person in our little town. Eventually I became one of the top 3 wedding photographers, and people stopped asking, but it was hard at first because I needed the money.
I’m not in that business any more, but I have learned from my past and now I implement this strategy into my online business.
Thanks!
It isn’t really a horror story but was a massive learning curve. I was just starting out (still am) and got panicked about a workshop that wasn’t selling so offered a discount for a week. Got an email from someone who had already registered at the normal price saying it wasn’t fair.
I did respond with a validating email which thanked her for making me realise my terms and conditions were not that accessible. Then redesigned my terms and conditions to ensure my “right to change prices at own discretion” was at top of page and also at check-out in my store.
She was actually pretty good about it but I have not offered discounts since because that burned me. She later registered for another course and as a gesture of goodwill I personally offered her a third at half price. Not sure if it was well managed according to rules of trade, but she now regularly advocates for my business on Facebook and in other places.
Lookin snazzy in the suite! BOOSH!
Aarrrrgh! I just put up a discount offer on my website the day before… I’m tearing it down!
You are so right Derek.
Now that I think of it, with a discount you leave a customer wondering if the product /service had been marked up in the first place.
So glad to be a BTC subscriber!
Nisar
This was seriously the most PERFECT timing. I have been contemplating for months about doing a flash sale on a product I offer but it just didn’t feel right. I know it’s worth the full price and I don’t want people depending on sales for my products. Thank you!
Derek – Thank you so much for this video, I was just considering doing a sale the other day! I’m that web designer – and I am working right now on rewriting the copy for my packages page based on “outcomes”, instead of just a detailed list of what’s included in each one, based on one of your other vids.
Back to this post though, I have seen discounting be bad for big retailers and for many of my small entrepreneur clients, so what you’re saying makes perfect sense. My business coach, for example, offers her programs to me for huge discounts – and now I would never dream of paying her full price for one.
I’m curious if you (or anyone) thinks that you can add too much value? Like: Buy this at full price and you’ll get these 10 bonuses! I’ve seen a lot of people use this technique and after so many bonuses, I get tired of bonuses and tend to suspect maybe their product isn’t all that great if they have to give me so much for free.
You bring fresh ideas and so much value to my business on a regular basis and I really just want to say thank you, thank you.
Good video on discounts. Nailed it!
Learned very long ago that giving freebies or discounts backfire. No one values your product or service if they don’t pay for it. Consequently they don’t consider your service/product worthy and move on. It’s all in perceived value.
Derek,
Great video!
Although I don’t have any clients YET, I have had a few inquiries. As soon as I say my price, I’m told I’m too expensive. I am tempted to say, “Well…maybe we could work something out…” But I don’t.
One thing I’ve learned from my awesome mentoring coaches is to never lower my price for my services. I am worth it. If I do it once, they will always expect it.
I do like the alternative idea of a bonus ____.
Thank you!
This is something I’ve seen demonstrated in proven controls written by copywriter, Clayton Makepeace. He said that he many times he wrote to sell the heck out of the premiums far more than the product they were included with to increase sells. And he showed one of the several controls he created for a companies that profited extremely well from the copy he wrote for it. And that was a prize lesson I took from him.
I decided to test what he taught in a few ads I wrote during my erly freelance and affiliate marketing years. Selling premiums work far better than just selling the product alone and even at a discount.
The lesson I learned sometimes it’s not the price that people are on the fence about. It’s whether or not they’re getting more value than they paid for.
Great video.
I currently offer Angel Card Readings and because I have had so many questions regarding Gift Certificates, am offering them free this month with a paid purchase. So, I guess I am adding value and discounting at the same time. BUT, since I will not get slammed with all those certificates at once, the benefit for me is to keep MY energy flowing, I must do readings. Irregardless. The more I do, the better I am. So, next year when it does slow down, I will still have a gift certificate redemption(or 2) to look forward to.
In my past life I organized dating events. I let my singles call me – BAD MISTAKE. So many women called me to advise the cost was too high. The COST included the Speed Dating, followed by all of us eating dinner together. Wonderful events, like an adult evening out. The men, they just paid. One of my business owner (who I called because of all women moaning over cost) advised me that for him, if a woman did not think SHE was worth the cost, he did not want to be bothered with her. That enlightenment worked and I used his quote for the next events I offered.
Got to go with what you know!
Hey Derek,
Once again, I love the content and the fact that you force yourself to get it across in a few minutes. I tire of so many people who think their message has to take 30 or 60 minutes to get across because that’s how everybody else is doing it. Kudos!
I’ve often wondered about the discounting idea and glad you set me straight. Thanks for backing it up with data again.
Jeff
Just in time Discount Monitor!! I was going to discount my early reg price for a one-time seminar – DUH!! – especially when I have a limited edition book I can offer as early-reg bonus and I RARELY do this kind of workshop! Good Save!
Meanwhile, my discount story? You’re right! Sure incites quick sales. But one person who signed up, and became (still is) a valued client, for every renewal thereafter for sometime asked for a discount again. It made me feel annoyed, especially KNOWING I’d generated tens of thousands of dollars in revenue directly from the work we did together just on that discount rate round alone!
Nevah again. Perhaps I’ve found the first thing I’d actually like to tattoo: To speed up sales, don’t discount, add value.
Great to see someone else talking about the negative aspects of discounts. Especially after this past weekend of being bombarded with offer after offer. On day I’ve got an inbox full of mushy love letters gushing about how grateful people are to have me on their mailing list and the next day I’ve got a million emails from the same people all with variations of “buy my stuff because I had this incredible idea to sell it really cheap on Black Friday” Not only does it completely devalue what is being offered but it creates a race to the bottom over how much is given for as little as possible.
I wrote a post a couple of weeks ago against offering discounts for the sake of discounts and how to do them strategically. Here’s the link http://salesinflux.com/using-discounts-sell-products/
There have been times in the past where I’ve bent my prices when people have negotiated with me. It really does knock confidence when you allow peoples “reasons” to affect your pricing. Do not recommend it! I’ve not been in as much control as I should be at times in the past.
Have you read Oren Klaff’s Pitch Anything? Frame control is a term from it which describes the way that within each interaction we each bring our own “frame” based on your beliefs and they will always compete for dominance and success in pitching relies on maintaining frame control. This is what I always used to lose in the past.
I don’t even buy clothes in sales, I don’t need anyone telling me that I must have this and that. I will buy the things I want, when I want and not before !
Perfect timing with this advice! I’m just launching my business online and I don’t want to get into any bad habits now that I can’t undo later.
If I always give free shipping is this an added value to my products or percieved like a discount. Also, should I use it liek an added value in a promotion instead of offering it all the time?
Derek,
This is SUCH a great reminder. It’s tempting to discount, but you’re so right about it de-valuing the value of the brand AND making people expect it. I can think of tons of stores that I ONLY shop at when I have a coupon – because I know they give them out so often that if I just wait a little longer, there will be a discount waiting for me. They’ve definitely conditioned me to expect it. And I definitely don’t want to set that precedent with my business!
Thanks for the awesome tips as usual.
Thanks Derek. This has come at such a great time. I’m just starting to put together my own wee business creating websites for others – and I was thinking that I should start by offering a half price discount to get people to come on board.
I noticed that with your current new product, you’re offering it at half price until a specific end date – do you think that’s a good opening idea? Ie: “As an opening special, for the first month, all websites are half price and after that they will be full price”?
Great content as always. Thanks Derek!!
So true man! I did some Black Friday and Cyber Monday deals for my coaching business and I felt really gross about it afterward. 2014 intention – no discouts. I want to be the Apple brand not the Bed Bath beyond!
Great info Derek, as always… here’s the challenge. I feel like my whole industry has been conditioned to look for discounts. Whenever I buy a product, I immediately exit the page because I know (been conditioned) 80% of the time, there will be a downsell or discount page. Almost every marketer does it (not saying they should). On occasion, you may find an exception. So by not offering a discount, as do most of my competitors in my industry, would I be losing out on sales because most everyone has been conditioned to look for it? Man, I would love to figure out a way to “recondition” people and maybe it starts with me and others will catch on?
Thanks Derek- great reminders. have a question: What about “bundling”? We haven’t launched yet, so we don’t have market-tests for hittin’ the mark or not. We offer 4 programs, and 3 different kinds of analysis to personalize the info in the programs. We will offer the programs for individual purchase, and the option for personalized chart add-ons. If folks are inspired to purchase all 4 programs (they each have a distinctly different focus) and personalized chart at once: should we offer a discount when they get the whole kit-n-kaboodle?
A friend sent this link to me… and I really am intrigued, but I have a problem. I have an ebook (a breakfast cookbook) that I sell from my blog. I released it in October, and there were lots of sales and discount codes… is there anything I can do to recover that value once I’ve lost it? Also, I’m not sure this is even as pertinent to me since it’s the sort of thing people are only going to buy once. Thoughts?
Beth, why don’t you ask those who purchased your ebook to provide you with testimonials and let your list (newsletter subscribers) know that in x amount of days you’ll be pulling the book from your website, making changes to it and selling it for double the price? That way you’ll end up with lots of testimonials (social proof) and you’ll be able to raise the price.
Also, since people are only buying once, is there a way you can up-sell to them by offering them a members only website or community? For instance, a lot of private Facebook groups are for fee-paying members of certain communities and people pay a monthly fee to interact within the community and ask questions.
Awesome video. Did my first Black Friday sale and regretted it. Would free shipping be considered a good alternative to discounts?
This does not apply to my own business, but I have worked for a company where people started waiting for the discount, to buy their items. Even more, they sent angry or dissapointed messages for us sending a discount just a few days after they’d bought an item full price. Where they were very happy before! Same price, same product, but unhappy because they missed out.
I also noticed that the higher paying customers were usually happier and less demanding. They were more polite and more likely to thank profusely after being given great service, whereas people who were only willing to get the cheapest of the cheapest on a discount were more likely to complain.
So I’m taking this experience (and your vlogpost) with me.
Thanks!
Thanks so much for this video. Just starting out and did my first Black Friday sale but got no sale from it. Sorry I even advertise it. I did get sales after Black Friday without any discount being offered. Would free shipping be considered a good alternative to a discount? Thanks and keep up the awesome job! You are one of the best ! I have being implementing a lot of what I learned from you.
I needed to hear this! Thank you. I’ll be adding value rather then discounting. I just did my first and last discount for the weekend of BF/CM!!!
Hi Derek, great video and post! I just recently signed up to your newsletter PURELY BECAUSE I was (and still am unfortunately) discounting my products too much…and/or too often and liked your other posts on sales, etc.!
What do I do now? Do I go back to selling them at the regular price (50% more than my discount price) by adding a time-limited value? I’ve been discounting for so long now (with a 3-4 days only discount) that I’m sure I’ve trained my customers to expect the 50% off or they’ll not buy. Not sure if I should just “pack on the extra value” and go back to full price. Could experiment I suppose. Kicking myself for discounting in the first place. Big lesson learned! 🙁
Can say that my products do sell at the regular price and sometimes higher but my direct customers definitely expect the lower price.
Any advice?
Is monthly giveaways on FB worth it or it gives the same effect then discounts?
This is brilliant and I thank you for reminding me of this! I actually dreamed of you last week – you were shouting at me telling me off for some decision I was going to make in my business. That’s how much impact you have!!!
Also, people that took the discount did not say much thank you’s about it but people who purchased full price wrote to me bragging about my excellent customer service and beauty of the product.
I will sen this video to Etsy because they have a coupon code system that most sellers use. I think they should change this for an add value system.
The addiction part was also true..even for the business itself!
Thank you so much for this video and I liked the joke at the end that made me smile!
I have a question: I did this discount for the first time. I think changing it for an added value next time wont disapoint people even if they got the taste for discounts?
Sorry for that… the first submition did not look like it worked so I posted again… even made a mistake while copying it here!
I’ve done both – and value works every time. I had a brick and mortar formal shop years ago and the effect of ‘discounting’ was totally entertaining. The second there was a discount associated with a product, the value of that product immediately became negotiable – that’s not a foundation you want to build on.
Your point is spot on. I would love to know your thoughts on how you retrain a consumer base if you’ve already exploited the addictive behavior of discounting?
I’m not too far off from Amy. I did the same things but I did get sales. All the sales were from my existing customers. Not new ones.
I normally offer a 10% discount for signing up to my newsletter. Now after seeing this video, I took that down. I’m thinking of doing something different for the incentive.
Thanks for this video. I was thinking about this last week.
One more thing I would like to comment on, and I find this interesting. Whenever I do have a “sale” I only get a handful. About a week after that sale has concluded my sales actually increase. Why would that be? I’m not complaining, but you would think they would have rather used the discount.
Thanks again!
Thanks, Derek – another great video.
I have consistently had the problem that I after offer discounts on my editing services to get new clients to sign up, they continue to ask for the discount on later projects. Super annoying! And if I’d just signed them up with my regular rates to begin with, I bet they never would have even thought about asking to pay less.
I just took off all mentions of “discount” on my website. Awesome, thanks for the push!
I did the same thing as Amy above and came to the same conclusion.
Also, I mentioned in my shop announcement that the sale was applying to all prodcts and that they just had to enter teh coupon code at checkout. But I did not put the sales pitch on each item’s page, only on a few. this was to make a test and also it would have been too much time to edit all my item pages.
After the sale, I saw that 99% of my sales came from people who did not read the shop annoucement and if they saw the items with the sale pitch they did not bother entering the coupon code on what they wanted to buy, or they just did not see the sale at all.
Anyways, even if I showed out there much more the items with the sales pitch I ended up with 99% of my sales paied at the full price.
Also, people that took the discount did not say much thank you’s about it but people who purchased full price wrote to me bragging about my excellent customer service and beauty of the product.
I will sen this video to Etsy because they have a coupon code system that most sellers use. I think they should change this for an add value system.
The addiction part was also true..even for the business itself!
Thank you so much for this video and I liked the joke at the end that made me smile!
I have a question: I did this discount for the first time. I think changing it for an added value next time wont disapoint people even if they got the taste for discounts?
I ran a discount offer in January. Interestingly enough most of the $45k in revenue it generated came after the discount period ended. But one client put down 3 deposits and never started the projects. Now they want all 3 projects done, almost a year later! Argh. Another lesson – DONT let people credit their accounts with you, or if you do, be clear about when the credit expires.
Hi Jessica,
I had a similar situation arise a handful or years back when a client had gone MIA during the project (not answering phone calls, emails) so I chalked it up to experience and moved on. Then, over a year later, his new intern emailed me with a long laundry-list of change requests (many which were way out of the original scope anyways!).
Advice: Get a lawyer to review your contract templates, and keep a paper trail for everything!
When I first started out in web design and marketing, I made the mistake of negotiating with a client who wanted to get the price down.
Now I realize that was a red flag, warning me what his priorities were and that it would be tough from the get go managing expectations.
If someone can’t see the value they will get from your services, either you’re not explaining it properly (hire a copywriter), or they’re not someone you’d want to work with anyways.
Yes! I’ve offered a discount on the first month of service, then the next month they’re paying more and it feels sh*tty. No more discounts, just added ‘bonuses’ for incentives. Thanks, big D!
Some of your best advice ever! I offer a coupon to new subscribers that’s good for 48 hours and I am always going back and forth in my mind on whether or not this is a good idea. I’m changing it today to a free coaching session with purchase. This video really made me think about my own purchasing habits in regards to coupons, and you’re exactly right. Thank you Derek!
Boy, do I feel like a dummy now… I’ve just offered a discount to NEW clients for this month. Ne-ver again! Your idea about adding value instead makes much more sense and that’s how I’ll approach marketing (discounts) in the future. Thanks, as always for your brilliant advice.
We’ve found this in our split tests – while the spike in sales is a great shot in the arm, over the long term having no sales is actually more lucrative, even when the sales were timed precisely!
Great video, keep it up Derek! Loving the Social Triggers Insider podcast as well!
The only customer that ever asked for a discount because she said it sounded expensive was the same only customer that ever complained. The sad part is she desperately needed the help in my expertise. She did not ask for money back and we still have one more session together, but I am never going to give a discount for an ” I’m not working” sob story again. I do prefer to gift my course, as I have done for truly impoverished disadvantaged women in tragic parts of the world. That feels good. Discounting doesn’t.
I learned a huge lesson right there.
Derek,
I run a video production company. Here is the scenario:
1. They ask for film x and what this would cost
2. I give them a budget for XX
3. They come back and say we have only XY
Do I now reduce value, i.e. I could say: Let me see how we could work this out. If I remove a shoot day we can get closer to your number.
Any suggestions?
I work for a grocery store which marked down rotisserie chickens to half price when the next batch was about to come out and at the end of the night (around 7pm) when I was starting my cleanup routine. We kept getting people coming in at 5-6 o’clock coming in asking ‘Can you mark it down for me?’
Okay…
After a few weeks I got sick of it. The rest of the staff was sick of it too. So we pushed it back to 8 and told customers we wouldn’t mark it down until it was time.
The questions continued, but they got WORSE and more frequent. I was now in the middle of clean up and having to stop what I was doing to mark the stuff down.
FINE.
We roll it back to 9. What happens? 5-9 is asking if we’ll mark it down. NO. Okay. The chickens stop selling until 9, when we mark it down and 15 minutes later are GONE. Every-last-one.
OHNOYOUDIDNOT!
We stop all hot food markdowns. Period. End of discussion.
First week, gnashing teeth and disappointment from customers. I sup upon it with a spoon and get more accomplished since I’m not stopping every 5 minutes.
Second week, the customers correct course and start buying the chicken like CRAZY at full price!
Nice anecdote! Enjoyed reading this 🙂
Thanks for the great advice Derek! I sold more memberships on my website (with a discount) in the last week that I have in the last month , but in the future I will add more value instead.
I’ve never had someone harass me over my price, and when someone asks I usually just say, “this is what I charge and I understand if you have to hire someone else.”
I did a mentoring discount for my sister-in-law and learned from it. It wasn’t that she didn’t take it seriously what I suggested to her but I know that she would have put more effort into her homework if she would have paid more.
I’m grateful for the experience though because it showed me directly what my own beliefs were about the value of my services, and as such of myself.
I was once asked to eliminate a set of fees that I usually charged by a great client and referral source. I felt like I was over a barrel and I ticked off the client when I said no. We had lunch, chatted about it and I saw his side and went ahead and gave in. Unfortunately I lost out in the end – I failed to account for the fact that ass a major referral source he felt entitled to special treatment. He was right. In the end my failure to immediately say yes, or better, to have anticipated his desire eroded our relationship until he stopped referring business to me. A single $400 fee cost me $100,000 in the long run. Blanket discounts should be avoided but strategic discounts should be planned for.
Thanks Derek, I appreciate all your advice!
Not discounting is the best advice I’ve learnt from you.
I never advertise discounts for my furniture. I want customers to think my furniture is super popular with other people, and doesn’t need to be discounted. If a company has frequent sales then they need to artificially inflate their price, and only rely on sales.
So true. In one business I run, our competitors would constantly offer discounts. We never did. A year or two later almost all of them dropped their prices permanently due to people not purchasing at their normal prices, and we were still getting sales at a much higher price.
Derek,
Great video! I’m putting together a course on premium pricing for experts, so this couldn’t have come at a better time.
Jason
I used to work for a large residential service company. We were always in the price vs. volume debate. Our average sale was roughly $4k when our management team took over this under-performing division. We doubled that in two years AND increased our close rates.
Every time we “experimented” with discounts & lowering our price to drive volume, the same thing happened: We sold the same amount of units at a LOWER price.
For businesses with the intangibles, like service, it’s more about your value proposition & sales force than your pricing. Love the bit about adding value!
I used to sell CDs on Amazon. My main competitor was selling some CDs at £0.01 so I did, too. Then I realised that Amazon still charged me £1.28. That stopped me!
We did a Daily Deal (like Groupon) a couple of years ago. It was disastrous! We sold over 200 for the half off food service. We serve a set High Tea menu and had customers expecting an all-you-can eat buffet. They tipped on the balance of their ticket, wanted to extend the coupon expiration date, and then Yelped us for not getting enough. We were told we would get more repeat customers, but they’ll only come back with a discount. Our loyal customers pay full price and they come back. My staff threatened a mutiny if we ever did it again. I prefer your added-value concept.
I have a facebook business page Gina’s Art Hammond . I especially enjoyed your message today on discounting. Thank you,gh I like the new dress code by the way-You look sharp! gh
Hi Derek,
This is an awesome video and an interesting perspective. I’ve often discounted my products and services to increase sales and gain clients. Up until now I thought it was smart marketing.
I still don’t see anything that wrong with occasionally discounted or adding in bonuses, but I think it should be more so done to show your current clients and customers your appreciation or to say thanks, rather than to gain new clientele.
Thanks for sharing your insights on this topic, Derek, you’ve given me yet something else to think about.
Keep on droppin’ ya’ knowledge! 🙂
Ti
I need help.
My dad imports wine just like champagne called “Krimart”
Sales have been very slow, and we were planning to do a 30% discount code soon to boost sales in december, as well as having extremely low (50% off) prices for 48 hours only next friday/saturday.
Should we instead say “buy 3 bottles and get 1 bottle free” or “free shipping on all orders before new years” or maybe throw in some champagne glasses in for free somehow. I would LOVE some feedback. The website is krimart.dk/shop if you want to see our products – its in danish, but you get the idea.
Mr Andersen, I personally think buy 3 bottles and get 1 bottle free is much better than a 30% discount. As is free shipping before new years.
Derek, this video was fantastic! I always find that my customers very rarely buy when I hold a sale but the minute it ends, sales increase. It’s very strange. I’m now off to remove the sales on my website and take off mentions of discounts. Instead, I’m replacing these offers with bonus products and free shipping.
I love free shipping!
Derek, You are a riot! Q-pon, coupon…who cares? This was crazy timely for me since I am about to open the cart for my Smart Creative Style Course again. Value add-I knew that but with all hte sales that have been coming at me the last few weeks, I needed your words to remind me! Thank you!
Hi Derek! You are absolutely right! I wish I had this information a long time ago. Psychologically, when I see a coupon code field on a sales page, then I go looking for the coupon code because I don’t want to pay full price! I like your idea of simply adding on value (instead of discounting). In fact, I was just getting ready to record a webinar for my list on the “Top 10 Ways to Make Money From Your Website” and I had 3 special offers set up. However, I am changing those right now so that instead of a “discount”, I will be adding in bonuses. Thanks so much for your video! This truly helped me today and I am spreading the word about it!
Kismet! I literally had this idea yesterday and am incorporating it into a promotion I’m running tomorrow. Great suggestion, thanks.
What about early bird specials? When they buy before a date and then the price goes up. Is that just another sneaky form of discounting? I do like the “add value” model you described.
To answer your question, I have never been harassed by a client but I can see how offering discounts can be dangerous. For example, I know plenty of people who wait for people’s “Pay what you can to celebrate my birthday!” deals and don’t purchase all year until that time. So not cool.
Another great video!
I personally try to avoid discounts myself for this same exact reason. It’s a little easier for me to do that as a web developer, but I still find clients begging for discounted rates.
In fact, to this day, I still have a client that demands a discount on every service I offer them. To counter this, I just raise my prices, and give them a “discount” that way.
It’s no horror story, but annoying nonetheless!
Derek this is INSANELY helpful advice for me! Can’t tell you THANK YOU enough! I just launched a new online training course (on how to market your business/brand using LinkedIn) that I’m selling and have run into this over and over – people saying “the price is too high,” and then I’m being tempted to “wheel and deal” or offer discounts to get them on board and not miss out on extra cash.
But it makes total sense that while I might reap some short-term gains and extra cash, I’m training my clients/prospects LONG TERM to only buy when I offer a discount or sale.
I also LOVE the idea of instead just adding extra value (1-on-1 consulting time, bonus group training, live Q&As, stuff like that!) instead.
Thanks again!
Great video Derek.
I think that if you’re only offering 1 product, and you’re offering a discount once a year, then there’s no harm in offering discounts.
However, you should NEVER discount your services.
NEVER.
Hi Derek,
Very interesting points. Do you think Groupon and other discount sites are detrimental to your brand value or can you make exceptions to reach new groups of people?
I would also be curious to know the answer to this question. We use a one time offer for new clients only through an ongoing Groupon campaign.
When i see a company offer a discount to new customers, I’ve found myself thinking, “Why aren’t i rewarded for being a consistent customer?” Just something that i’ve noticed.
[ding!ding!ding!ding!] We have a winner! BJ – my thoughts exactly! I walk into (a big box hardware store) and they have hats, t-shirts, work gloves, nail pouches, etc. with the store logo on them. They are priced between $0.98 and $10 – how come I’m not getting them free with a $X purchase? It cost them pennies to make, and as a “reward/gift” I’d wear it all the time! That’s the least expensive advertising they could possibly pay for!
Derek, Great message about ‘don’t discount”. BTW: nice duds, you’re really styling, looks good.
I did a free shipping special for Black Friday, Small Business Saturday and Cyber Monday (my business is a small business that operates mainly online right now). I got a lot of views, but not a single sale. And I paid to get that discount out there to new folks.
I also heard that this year is supposedly the worst since 2009 in terms of shopping. What do you think?
I agree with Tarun. With sites like Amazon, eBay, and Walmart doing free shipping very often (or during the WHOLE) holiday, free shipping is not much of an incentive to buy. As Derek was saying, that’s actually a discount, it’s not adding VALUE.
I’m a graphic designer. Since October, I’ve been working on ads for all kinds of places for the Holidays. The #1 theme I saw in the ad-wording was “Buy $50 worth of gift certificates, and get a $10 certificate for yourself”.
Why not run a “last minute shopping” ad where, when you buy 3 scarves, you get a free one for yourself? Or, if you spend over $100, you get $20 in store credit.
Hi Amy,
I also agree with Justin’s comments below. Here’s a few more thoughts to share.
First of all, congratulations on getting this far. You’ve clearly put tons of work into your site. And… those are really just the beginning baby steps. Next is finding your ‘tribe’ and marketing regularly to them. I agree that the anime and knitted things don’t seem to be connected. plus you have something about website work in there too. Separate sites so you can develop strong followings and market effectively to each one.
JUST DON’T GIVE UP.
For the knits, when you show the added value of what you are creating then the buyer feels pulled in. You cannot assume people will automatically understand what it means that these are handmade – and that means often a higher price. You must show them the VALUE of handmade. Don’t come from any sort of defensive position – which is what I hear in your response to Sadiq below. Say all you did in your response in a positive way – a short paragraph about the value of handmade goods. That your energy directly transfers into what you make and that in turn is given and received by the person who uses your products. It’s a personal connection you are creating and in this day of mass production in some far off land, that has a value to the buyer.
As you develop your product lines, you might want to explore different knit patterns too. These all seem the same basic stitch – purl – I think that’s right. Some variety beyond color choices might be a good idea.
Anyway, I wish you success. It will build over time. It’s not going to happen overnight. But it will if you keep at it.
Amy, I clicked on your name to go to your site and I really do not mean to be rude or put down your website, but I found your website very difficult to navigate, and I probably would have never found it if it weren’t by chance of me reading this comment on this site. There is some really cute stuff!
Anyways, a friend of mine just started using OpenCart for her online business and used OpenCart Addons to set up the website for her which made it easier to navigate and he gave her some tips and tricks to help her gain more traffic to her site. I do not know if this would work for you, but it’s worth a try! 🙂
Hi Amy,
I checked your website out. I assume it’s the one
you are talking about in your comment.
This time year round, people are looking for savings
and items related to the festive season especially for exotic
items in electronics or other leisure items they will find
useful. Like braai’s, outdoor equipment, etc (they wana be
social this time year around, so they’ll be looking into buying
those things)
Christmas is the time I buy new tyres for my car! 😀
Your market is a very very very small niche and in Christmas
time it’s even harder to get your clients to buy your products.
They are busy searching for those christmas goodies, festival related
products which your products dont seem to be at all.
Bottom line: Your product does not appeal to buyers this time of
the year. It has no “brand” power and so people do not know why
they should buy your product compared to another product like
christmas lights for the tree.
Make another product for the festive season. Make another product
for lovers this valentine’s.
So you say I need more holiday themed items? All right, I can work on that.
Hi Amy,
Your knitted products appear to be very nicely made. There are certainly people that would like one of your scarfs for the holidays. I don’t see the season being the root issue of your sales. I also don’t see lack of brand being the issue with not being able to capitalize on your free shipping offer. Here are some quick questions/suggestions:
1) Do you have Google Analytics or any other Analytics Software running on your site? If not, I would recommend setting that up immediately. If so, I would take a look at the bounce rates for your home page as well as your shop page. My bet is that the bounce rate is insanely high for your homepage especially for a visitor who thinks they are going to a website for hand knitted products.
2) I would recommend separating your anime items and your hand made products (maybe aside from your doll clothing) into two separate sites.
When I first visited the site after reading your comment about not being able to make a sale of your hand made clothing I was instantly filled with confusion by your home page. Your homepage should give the visitor a clear idea of 1) what the site is about and where they can find it 2) some sense of cohesion between what is on that landing page and what message brought them there.
Unfortunately the giant unicorn and the chibi-you aren’t going to be associated with hand knitted scarfs by the majority of the population. Rather than put the insane amount of time in that it would take to explain the connection between the product lines it would be easier on the visitor and create more trust when the overall brand/website/marketing message align with the product. That is why separate sites will be the best option going forward. It will also make obtaining targeted traffic for each product line a bit easier.
Hi Amy,
Are you sure about that statistic? I saw on the nightly news that this was the best year since awhile.
I’m going by what other craft business folks have been saying and they have been in business far many years than I. As they have decades of experience over me, I assumed they knew what they were talking about. Perhaps it was a mistake? Or perhaps they were referencing just the hand made industry?
Problem is, people have become so accustomed to these holiday discounts that they expect every business to have some sort of sale during these times.
With tablets and smartphones making it more easy than ever (and quicker to search for the lowest price, the best deal), online shopping has been steadily increasing in numbers and dollars.
Retailers needed to kick their game up, and so have started Black Friday on Thursday night (formerly known as Thanksgiving), and then the online world kicked back with the extension of Cyber Monday into Cyber Week.
What’s next?
(Christmas).
Not to be rude Amy but i think the reason you didn’t create any sales even though you offered free shipping is because your products have no authority ( no one knows about them ) and also they are a bit expensive compared to better known brands that offer the same usability’s as your products !!
Are you referencing garments you see in places like Walmart? My knitted scarves are knitted by hand in the USA, not fabricated in a sweatshop in China or on an assembly line. Nor do I use a knitting machine to make these. My buyers have an appreciation for the hand made and understand the work that goes into them versus a machine in an assembly line. 😉 If you go on to etsy, you will see many knitted items that are well over twice the price of what I charge.
Amy there is no way you can compare what your doing with Walmart! First of all most people hat shop at Walmart are looking for convenience or a deal. You are not in a position to offer either and here is why.
The stuff that you make is hand made. You want repeat customers that have some flexible capital to outlay on your creations. You want these people to come back over and over and over again. There is only one way to do this. 1. Build a community. 2. Offer some high quality Stuff.
Beyond that your site feels cluttered and confusing. I like your scarves but the checkout felt Janky to me. Then I saw this cool button and I started to think about what other buttons you might have and how people would find them. Then I realized that nothing was categorized and if there were they are not easily noticed.
I checked out the Chib-you service. I was in! Until I read you needed a full body shot with the cloths I wanted to be chib-you (ed) in. Thats to much work sister! Now I have to stop, get dresses, take a picture, upload it, and then make my way through the Janky check out. You have to make this easier. It might eve work better as a standalone website. Chibyou.com maybe?
I also saw that you offered a video editing service. Your all over the map! This makes you look real bad and makes everything your offering look amateur.
Will all that being said I bet your not optimized for the search engines or targeting keywords in your niche. Thats one of the way people are going to find you!