Add value rather than discount
Tuesday 7th of November 2017
Tuesday 7th of November 2017
When talking to business owners who need more business, many of them seem to want to reduce prices to encourage customers. I would argue this is counterproductive. If a business is struggling then you need every bit of profit available! It is much better to add value to your products so that more people want to buy them rather than try and compete on price.
"But one of my competitors is cheaper!" You might say, but I would respond saying "So what?" let them compete on price.
A great example of this is supermarkets. Asda, Tesco, Sainsbury's - They are all the same so what do they compete on? Price. And who wins? The cheapest! Do you want to always be the cheapest? Look at M&S and Waitrose. You don't see them trying to compete on price. They have positioned themselves to give their target audience what they want and offer great food. Look to improve your product, not discount the price.
Rather than offering 20% off, which hits into your profit margin, look to see what you can add. We worked with a company who sold a product which retailed at £75. They wanted a promotion to run to encourage more sales.
Giving 20% off was one idea but this reduced the price by £15 which isn't a huge saving to the customer and was just money. We suggested giving away a free t-shirt. These cost £6 to produce (costing less to the company than a 20% discount) and not only did customers love getting a free gift, but whenever they wore the t-shirt they were adverting the company for them!
Money is not exciting. You may think it is, but actually it's the value you put on things that drive what you and your customers spend money on.
When I walk into town I will quite happily spend a couple of pounds on a coffee. That coffee probably cost pence to make! It's just hot water and beans! I can make myself a coffee at the office but I don't have an issue spending a few pounds on one. At the same time, I often go into a shop and buy a few items and get asked: "Would you like a 5p bag?" I immediately say no! I am not spending 5p on a bag!
Now, this makes no sense. I am happy spending a couple of pounds on something I could make myself but I won't spend 5p on a bag which will actually make it easier for me to carry my shopping. Why is this? Perceived value. I don't value the bag at all. In fact, I would probably actively buy my shopping from a shop which gave away free bags even if it was more expensive (not that shops are allowed to give away free bags, but you get the idea).
Have you ever waited to purchase something as you knew a sale was coming up? Or been annoyed that you bought something from a company who then advertised 25% off the following week? If so then why do it to your customers. You will find that people will delay purchasing from you in case it is cheaper next week, especially if you do these discounts regularly.
When thinking of a promotion, think about how much profit you want to take out of your pocket and give back to your customers. In the example of the t-shirts say you sold 100 items, would you rather give away £1500 or £600?
Add value, don't discount!