To discount or not to discount. That is the question… Everyone loves a good deal. While coupons and discounts can drive customers to your website, boost engagement, and generate new revenue, there are many things to consider before deciding to implement a discount into your business strategy. Will a discount lessen the perceived value of your services or products? Can you afford to discount your hard work? Our marketing pros here at Charisma discuss the pros and cons of using discounts in your marketing and how to uphold the value of your business if you still want to reap the benefits of discounts.
Key Takeaways
- When done correctly, discounts can be a great way to widen your customer base, but remember- they are a short-term tactic rather than a long-run strategy.
- Discounts can help launch or introduce a new product line and encourage customers to try something new.
- Discounts can attract existing customers to come back to your business as a remarketing strategy.
- Implementing discounts can cost your business money and can lead to lower profit margins.
- Revenue that has already been generated can be cannibalized by existing customers who wait for discounts.
Cons of Discounts
While discounts can bring an influx of new customers to your business, they may ultimately attract the wrong attention. Many customers may just be tempted by a good bargain, rather than appreciating what your business has to offer. This can set a bad precedent for the future of your business. Discounts might not be right for your business because:
Discounts Can Cost Your Business Money
The truth is any discount that you offer means less money in your pocket. Before deciding to implement a discount, calculate whether the discount will make a difference to your profit margin by bringing in new and old customers alike.
Discounts Can Impact Existing Revenue
If your regular clients and customers get into the habit of waiting for a discount, the impact on your revenue that has already been generated can be drastic. It is best to consider when and how to offer discounts to avoid negatively impacting your revenue stream from your existing customer base.
Discounts Can Reduce Profit
It’s simple. While coupons reduce the customer’s cost on a service or product, the cost of producing your product or service will not change, which can result in reduced business profits.
Consider the value of a discount campaign and whether it will lead to enough new sales revenue to offset the cost of the campaign.
The Perception of Your Business Can Suffer
We all expect higher quality services and products to cost more. Prestigious brands like Louis Vuitton, Tiffany, and Mercedes Benz rarely offer discounts, and just like these brands, your pricing should be aspirational. Don’t devalue your brand image by offering too many discounts. Instead of bolstering confidence in your business, you’re inviting your customers and clients to lose confidence in what you have to offer.
Pros of Discounts
Of course, there is an obvious reason why businesses use coupons and discounts—they’re effective! And when used correctly, they can widen your customer base and give your business a boost in revenue. Implementing discounts into your marketing strategy can be beneficial because:
Discounts Can Attract New Customers
Discounts make it easy to entice new customers to try your product or service before buying at full price. The good news is that many first-time buyers return to make another purchase after the initial discount.
Using discounts can increase your brand awareness and entice people to switch to your brand.
Discounts Are a Quick Way to Drive Sales
If you want a quick infusion of sales, a discount can be a great way to boost your revenue and drive sales. Just make sure that your business can afford to sell your products and services at a discounted rate.
Discounts Offer a Great Way to Up-Sell
The art of up-selling occurs when you persuade a customer or client to purchase a more expensive item or service on top of a product that they are already purchasing. This can drive sales and profit margins without devaluing your products. Further, cross-selling and discounting in this way maintains your standards, keeps customers talking about your products or services, and helps uphold your values as a brand.
Planning a Discount Strategy
When planning a discount strategy, think about how it would improve your bottom line. For example:
- When a discount drives traffic to your website, customers may buy other non-discounted items.
- Discounts can introduce new customers to your products or services and foster long-term communications through email or social media.
- Discounts can encourage existing customers who haven’t been back to your business in a while to come back. For example, you could send a coupon to customers who haven’t ordered or used your services for 60 days or more.
Market Your Business with Charisma
While there are many pros and cons to offering discounts, the best way to market your business is unique to your company. Our team at Charisma will help make your business unforgettable and inspire devotion from your customers with content writing, SEO, social media marketing, email, branding, and more! Tap into the connection with your customers. Schedule a marketing consultation with Charisma today!
