Navigation: The Purpose of Price Drops, The Pitfalls of Discounts, Sales, and Promos, How to Drop Your Product’s Price without Looking Desperate, Protect Your Product’s Value, Keep it Simple, Be Consistent Even When You Drop Your Price, Discounts Should Feel Fair, Common Mistakes to Avoid When Dropping your Price
When correctly applied, discounts can help you find more loyal customers, increase brand awareness, and boost your revenue in the long run. But at the same time, if you don’t do it right, discounts can actually damage your reputation and make you look desperate.
Discounting mistakes can make people think twice about the value of your product. As an entrepreneur, you never want people to doubt your product’s value. So don’t get sucked in by short-term revenue opportunities.
If you want to drop your price, you need to know how to do it right. Or else you might realize that those short-term opportunities were actually costing you.
Discounting is a signal to your future customers that you are willing to accept a lower price for the same value delivered. It is also a good way to catch other people’s attention, when they wouldn’t even consider buying your product otherwise. Discounts can make them see things in a new light.
The goal of discounting is to earn more money in the short term by creating a sense of urgency within your prospective customers. Your promo or sale should give them that FOMO or “fear of missing out”. When you drop your price, people should think that they are going to miss a big opportunity if they don’t jump on board now.
These are the psychological aspects of discounting that you want to learn and use to your advantage.
Unfortunately, inexperienced entrepreneurs can fall into certain traps while setting up their discounts. Discounting is hard to get right. It will take a bit of experience to implement it the right way. However, you can’t afford to go through trial and error because it may take time for your company to recover from these mistakes.
So instead, we will talk about some of the pitfalls you want to avoid when dropping your price. Remember that people can sense desperation. You don’t want to come off as desperate for revenue, because it tarnishes your reputation and lowers the value of your products. These effects are long-lasting and hard to reverse, so make sure you avoid them in the first place.
The way you price your products tells customers everything they need to know about your company. Offering the wrong discounts can make your products look cheap—and not in a good way.
The first thing you need to know is that most of the customers you convert with a discount were likely to become customers anyway. Not many people need that extra push to make a decision. Discounting is always a calculated risk because you might be sacrificing higher potential revenue in favor of lower short-term secured revenue. There’s a chance you might be leaving money on the table.
Another thing you need to consider is that the people who are most interested in your products are the ones that will keep a close eye on all your pricing and promotions.
Your product’s value is arguably more important than its price. Unlike the product’s price, which is a fixed number, its value is based on people’s perception of it.
When you pursue an aggressive discounting policy for an extended period of time, customers lose sight of your product’s value. They may think that the discounted price is really what your product is worth. You don’t want to lose control over your prices because people think it’s not valuable.
It takes time to recover from this kind of mistake. Do not drop your prices for extended periods of time, unless that’s the new price you want to push. By avoiding extended discounts, you can reset value perceptions, but it will take months or even years to do so. While your customers readjust their expectations, your sales continue to suffer.
When putting a discount on your products, only give out one number. If it’s a 50 percent discount, keep it at 30 percent. Do not make it 30 percent off and buy 1 get 1 free. It becomes confusing for customers, and complex discount offers rarely pay off anyway. A simple but easy to understand promo is more attractive, more straightforward, and more effective.
Maintain predictable discounting patterns. Even though you want to create a sense of urgency, you want your discounted prices to be predictable. Discounts should not come as a surprise. This way, people can set their expectations properly.
If people know that you only offer 10 percent discounts, they will jump on board the moment you announce such a discount because they know it’s as low as the price can get. When you keep your price drops consistent, people become aware of the best deal they can get from you. They won’t wait around for an even better deal along the way.
Discounts should never go beyond a certain threshold—so make sure everybody knows what that threshold is. If you can keep a scheduled sale, it can also create anticipation and urgency. For example, if you go for a year-end sale, keep that schedule consistently. If they feel like waiting an extra month for an offer they know is coming, that’s alright. You are still booking that revenue in the same year.
You don’t need to go after every opportunity to have a sale. Keeping a consistent schedule is more beneficial in the long run because people know it’s a rare opportunity to get better prices.
Consistency is important because you don’t want any of your customers to feel left out. If you offer a 20 percent discount this month and then offer a 50 percent discount the following month, a lot of your customers are going to feel frustrated that they didn’t wait another month to buy your product. Even though they saved 20 percent, they will still feel like they overpaid. Avoid this by keeping your discounts consistent and predictable.
If you do encounter this situation, you can minimize the damage by implementing a retroactive surprise reward for those who purchased the product before the discount. You can send them a non-monetary gift to show that you care. Though you can’t please everyone, it may still eliminate any bad feeling and strengthen your relationship with the customer.
There are plenty of discounting pitfalls to avoid, and here we are talking about them. First of all, you want to avoid confusing discounting policies. Again, keep it straightforward and simple. If it’s confusing, it’s not going to work.
Another mistake inexperienced entrepreneurs make is that they drop their price too often. This tells people to always wait for a better deal to come around. You are lowering the value of your product by always putting it on sale.
Do not run special promos for every holiday: it only makes people think you are desperate for revenue. If you always put discounts on your products, you are not creating urgency.
Another bad discounting practice is implementing personalized discounts. People may try to ask you for personal discounts for all sorts of reasons, but you should not agree to them. Create a polite response template telling people that your product prices are fixed and that there are no exceptions.
If you don’t want to make your product seem cheap, avoid bundling it with an expensive product. If you have to bundle your product with something else to make sales, people may think there is something wrong with it. It doesn’t work that well.
Finally, always treat your existing customers fairly. In your attempt to attract new customers, never alienate your loyal customers. This is the deadly sin of discounting because it ruins the trust you have worked hard to build.
Your existing customers don’t need constant discounts. They are the easiest to sell to, and they are the most profitable source of income. When planning your promotions, make sure your existing customers don’t feel cheated.
These are the fundamentals of dropping your prices without looking desperate. Even when you are lowering your product’s price, make sure you are not reducing its value.