Disadvantages of Discounts (And What You Can Do Instead!)

Whilst there’s no denying that offering a discount can make a product or service seem more appealing/accessible…

Problems can arise when you become too reliant on discounts to increase sales.

In some instances it can even have the opposite effect by making people suspicious or questioning the quality…

Not to mention potentially damaging the perception of your brand and building an association of “cheapness”.

In this article we’re going to explore some of the potential disadvantages of discounts, and what you can do instead.

Is Discounting Bad For A Business?

Discounts have been used by almost all kinds of businesses for years.

There’s also no denying the impact they can have on overall sales (especially when combined with scarcity). That’s why we use them occasionally ourselves on low-price, entry-point offers.

However, it’s worth bearing in mind that discounts not only shrink your margins, but when done too often; it may give a negative perception of your brand.

You need to ask yourself how you want customers to perceive you…

Do you want to be known for offering a great product/service or do you want to be known for cheapness and discounts?

Whenever we work with a client who is trying to compete on price alone, we highly recommend against this as a strategy!

Because unless you have an EXTREMELY unique product that nobody else has access to; the chances are, there are bigger companies who can do it better AND cheaper. As a small business, your costs are likely going to be higher and profitability is essential if you want to grow and scale.

As such, when you try to compete on price, you can quickly end up in a price war and be squeezed out and crushed by the competition…

We often see businesses and start-ups who work endless hours to generate sales. But then because their margins are so low, they end up stuck in a cycle of not having enough profit to reinvest into marketing so have to go back to the grindstone. This ends up being a perpetual cycle that destroy a lot of great businesses (and the owners wellbeing!).

Please don’t let this happen to you!

Now, I’m not saying you should never offer a discount; In fact when used sparingly and in moderation, they can be a great way to give your sales a boost! But if you can, try to limit these to entry-points offers only (if you’re a service based business) or special occasions/dates (if you’re an ecommerce business)

Disadvantages Of Offering Discounts Too Often

There are a number of major disadvantages when relying in discounts to increase sales:

1. You risk damaging the reputation of the brand

2. Customers may get into a habit of “waiting” for discounts before purchasing

3. You risk getting into a price war with the competition and being seen as a commodity

4. Discounting can end up hurting your profit margins

5. Potential customers may question the quality of your product/service

How To Increase Sales WITHOUT Discounting

Luckily, there are a number of ways you can increase your sales online WITHOUT having to rely on discounts. Here are just 3 of the things we help our clients with every day:

1. Increasing Perceived Value

If you’re not familiar with the term; Perceived value is a customer’s perception of a product or service, when compared to other products on the market. In other words, it’s what your customer thinks that your product or service is worth to them.

You can increase the perceived value of a product or service by clearly speaking into the pains or desires that are important to your customer. This will ultimately help them re-enforce the value and necessity of their purchase.

In order to do this, you’ll need to understand your customer avatar and their internal drivers/fears/motivations.

2. Identifying A Niche Market

The idea of picking a niche can seem terrifying to small businesses.

After all, why on earth would you want to intentionally limit the size of your market?

Well, there’s a saying in marketing that if you’re speaking to everyone, you’re actually speaking to nobody.

Consider that we’re constantly bombarded with more noise and adverts than ever before. As such, it can be extremely difficult to stand out with a generic catch all message.

So whilst it may seem counter-intuitive, picking a niche (at least to begin with) can actually help you get traction as mentioned in this article by WooCommerce.

That’s because it allows you to be seen as a specialist in the eyes of your client and help them to feel understood

Think about it, if you were going through a Divorce and had to choose from a do-it-all lawyer or a specialist Divorce Lawyer, who clearly demonstrates understanding of your situation… You’d probably pick the latter right?

After all, showing understanding is one of the most powerful ways to generate trust and credibility with your customers.

3. Improving Your Marketing & Positioning

If you find yourself relying on discounts just to generate sales; you may need to consider that your marketing and positioning is just off. This can end up attracting and bringing in the wrong type of customers.

Here’s the thing, if you’re offering a great solution to your customers problem, you shouldn’t need to convince or incentivise them to buy.

Good marketing speaks into our innate desire for transformation and progressions and promises us an outcome that we want.

Whether that be:

• Increased Social Status
• More Money
• Better Relationships
• More Happiness
• Peace of mind

When you do this properly, you won’t even need to “sell” as your audience will ultimately end up selling themselves.

Spend some time, thinking about what your customers REALLY want and make sure that your marketing speaks into the transformation you’re offering.

Alternatives to offering a traditional discount

If you’re looking for a way to increase sales without directly offering a discount, here are a couple of things to think about.

Repositioning your “discount.”

A good friend of mine recently ran a test on repositioning a discount as a “contribution” with amazing results.

So instead of saying here’s £50 off xyz, he re-positioned the offer as “We’re giving you £50 toward xyz”.

This serves the purpose of making your offer sound more unique, whilst also helping to negate the perception of “cheapness” with your brand.

Online Wine Retailer Naked Wines also do this through their affiliate partners by offering Exclusive £50 Vouchers instead of a traditional “discount”.

Creating a sample product or entry point offer

Sometimes people simply don’t have enough trust to buy from you YET. When this is the case, a good idea can be to create either a sample product, a lead magnet or an entry point offer.

This can help you to get a small initial micro-commitment/transaction from the customer whilst at the same time, giving you the ability to prove your products/services up front.

This is especially helpful for service based business who are selling a high-cost services.

It’s the same reason, we offer a FREE Website & Marketing audit to potential customers so they can see we know what we’re talking about 😊

Well, there you have it! A breakdown of the disadvantages, advantages AND alternatives to offering discounts in your business!