Bad Deals: How Small Businesses Discount Themselves to Death

small business discounts

With Small Business Saturday creeping ever closer on the horizon, many small business owners are looking for a way to get customers through the doors. Some are offering family-friendly activities, refreshments and other assorted holiday hullabaloo. Others are planning to slash prices and paper their windows or website with signs screaming “Sale!”

While it’s true that everyone is looking to save a buck this time of year, offering too many discounts can set your small business up for disaster in the new year.

Here are some reasons you should skip out on the sales and what you can do instead.

Discounts Don’t Guarantee More Traffic

A lot goes into determining the price you charge for a product or service. No one is running around willy-nilly with a sticker gun slapping prices on at random; there’s a reason that whatchamacallits cost $19.99 and whirligigs go for $36.50.

Cutting the price of a product doesn’t change your cost at all. When you discount your offerings, you need to sell more of them to make up the difference. If you can’t, that money is down the drain and you’re in a bigger hole than you were to start with.

You’re Risking Customer Confidence

There’s an old saying that goes “If it seems too good to be true, it probably is.” Sure, you think that offering your star product or service for 75% off will have customers beating down your door. Your customers, however, have questions. What’s wrong with it? Is it expired/recalled/inferior? Why are you selling this so cheaply?

In a perfect world, they’d bring these concerns straight to you and you could reassure them that everything is on the level. Since we don’t live in a perfect world, most of them are going to think “scam!” and run in the other direction.

Are the people who do buy worth losing the confidence of all the others?

You’re (Probably) Going to Have to Make Sacrifices

In many cases, the word “discount” is synonymous with “losing money” from a small business owner’s perspective. And while there may be benefits in the way of new customer relationships and loyalty, the money you lose has to come from somewhere.

What corners will you cut to make up the shortfall? Will you slash your marketing budget, scale back employee hours or spend more time at work (and less with your family) to recoup some of your losses? Are you prepared to make the necessary tradeoffs?

Alternatives to Discounts

You don’t need to discount your small business to death to draw traffic in! Instead, try:

  • Scaling your offerings. Not every customer will be able to afford your top-tier products, so you should aim to have offerings designed for every price point. This might mean creating bare-bones packages or offering products or services that generally come in a package as a la carte options.
  • Adding value. Competition can be fierce in the small business world. The trick is to justify your pricing by offering something that your competitors don’t. Your customers may pay a bit more than market value if you provide perks such as free assembly, a help hotline or an extended warranty.
  • Providing exemplary customer service. Customers, especially those in the baby boomer generation, love old-school good service. Remembering their names, carrying their purchases to their car or giving them special loyalty perks will go further than any 15% discount could.

Don’t Let Discounts Upend Your Bottom Line!

There is a time and place for discounts.

Most small business owners will have a sale or two a year, so a small discount will at least make you seem competitive without cutting deeply into your business. And if you get a great deal on one of your input costs, it’s completely fine to pass your savings along to your customers as a show of good faith. But gutting your profits to pick up more customers or undercut your competition can backfire in a critical way.

Mischa Communications offers affordable marketing services that can be scaled to any budget. Get in touch today and let us show you the value we add!