Chapter 2 – Financial Control – Rule your money
This is part of the ‘How to’ coaching series. An ongoing series of activities to make your business successful. Follow it step by step and see positive results as you develop a robust business model, set on a solid foundation.
Activity 24 – We never discount prices
That may be a bit of a simplistic statement, though each time you discount, you are potentially reducing the value of your service/product; and ultimately your profitability.
I have seen discounts of 10% on a product that sold for £10. Sounds ok, after all, it’s only a pound off. But when you take into account that it actually cost £9.38 total to produce, store and sell – they were making a loss of £0.38 per item sold. You wouldn’t do that would you?
I’m not saying that you should never discount, there are many profitable businesses that operate an almost continuous discount approach.
Discounting can be a useful tool for clearing old stock, getting cash flowing into the business if things are slow, but beware of the impact.
The ‘How to’ bit:
Rather than discount, how about offering more value – something that might not cost you much, if anything, but would be highly valued by the customer. My local coffee shop does a scheme, buy six coffees and get the 7th free. They have already made enough profit on the 6 to give a free one. And people often buy a cake to go with that free drink – So an additional profitable sale is made.
You could choose to build your business on a discount model… on a lower price model that still gives you the profit you choose. People love to feel they got a better deal – cynical, but true. Or, as in the case of high-end products and services, reassuringly expensive – no discount here. Your offer is of interest to people who want exclusivity.
If you would like to better understand the impact of discounting; or have a facilitated brainstorm session on the best approach to discounting (or not) for your business, follow this link and Contact Us…