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Offering Discounts During Slow Times

Guest post by: Joseph Lizio

Article Overview: Business is slow and you are thinking about offering discounts to boost sales. While discounts can easily increase revenue in the short-term, if certain guidelines are not follow, these same discounts could hurt your business long-term.

Offering Discounts During Slow Times

Many business owners and entrepreneurs consider offering discounts when business gets slow (sales are down or volume of customers is dwindling). On the surface, this may seem like a good idea to drum up business and boost sales, but only if certain criteria is followed.

Most business owners believe (and for the most part it is true) that promotions or discounts can lead to increased business volume or sales; via either new customers (getting them to switch from your competitors) or to draw back prior customers - not to mention giving your business new marketing materials as a means of staying top of mind in your target demographics.

But, there are some things to watch out for when offering discounts or promotions.

First, it is never good to show your current or new clients that you are willing to work for or sell your goods for less then your standard prices or the averages in the industry.

Why? Many new customers may see this as a "hail mary play" or last ditch effort to save your business. Those who think your business may be in trouble - many still come to buy your discounts (the good side) - but more than likely they will also have a bad first impression that your business is in trouble and might never turn into the long-term customer you really want or, at the least, won't feel compelled to refer your business to their friends and family if they feel your business might not be here tomorrow.

Second, regarding current customers, these types of discounts or promotions could 1) make them mad in the fact that they just paid the higher price and were not told to hold off and wait for the discounts (they feel if they are to loyal to you, then you should have been loyal to them) or 2) could teach them to just wait until business is slow and see if you will offer new or additional discounts (consumers do learn from the actions of the businesses they frequent). In fact, some customers may see that you can cut prices and begin to demand that you do from here on out to keep their business.

While discounts and promotion can be great ways to drum up new business and get the word out about your company, there are a few things to keep in mind.

When offering discounts, only do so as a one-off discount or event. This means letting your customers know (ensuing that they know through your marketing messages) that this is a one-time event and will not be offered again. This is why holiday discounts are so good for businesses. Most holidays only come around once a year and most consumers understand these types of sales events. Thus, ensure that your customers know that any discounts being offer (regardless of the reason) a one-time event.

Additionally, to ensure that future harm is not done to your business or in the minds of your customers - ensure that your discounts are not for your business's core offerings but for complimentary or peripheral products or services. This keeps those who frequent your business for its core offerings happy as well as might get them back in the door for additional sales. Plus, it lets new or potential customers know that your business is strong and that you are playing nice in an attempt to win their patronage.

Just make sure that any discounts are for products that customers actually want to buy and not for products that you can't sell - consumer will see right through this.

Look at it this way. You sell BBQ grills and accessories. Most customers buy your grills but tend to not fork out the additional money for accessories like grilling utensils or extra fuel tanks - not because they don't want them but because it is hard enough to justify a large purchase without going over board.

In this case, you could offer discounts on these accessories to either get those that have yet purchased to actually make the buy decision or get recent customers back in the door. Just make sure you discount the accessories they want to buy and not try to force on them the "kiss the grill master" aprons that no one ever buys (even if you tried to give them away with a new purchase). Make it something that will appeal to your customers and not something that merely looks like fluff on the surface.

Along these same lines, always make sure that your discounts are something that won't last. That your promotion(s) are a once in a life time deal (could even do it as a thank you to existing customers) and that it will not last very long - like a few hours or based on a very limited number of items (when they are gone the sale is done). This not only generates a fever in your customers to get down to your business now but also shows that you are still in charge of your company (no weaknesses here).

Lastly, always remember that in business, whether it is boom times or bust, cash is king. Therefore, if you are offering discounts, do so in a manner that does not further hamper your business. Thus, don't use your traditional selling methods like offering trade credit (10 or more days to pay) or allow them to purchase via credit or debit cards (with you paying those transaction fees on top of the discounts). The idea here is to offer discounts to get customers back in the doors but not to do so in a way that the discount drives your margins to the breaking point. Thus, offer the discount in return for cash payments. Not having to extend credit or pay additional processing fees can off-set some of the revenue loss from these discounts items.

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Article Tags: business, cash, discounts, profits, sales



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