Almost every business discounts’ – I’m not saying, stop doing it altogether however we need to limit what we offer and constantly review the cost benefit ratio.
What return on investment do you receive from continuously offering discounts?
Sure, there’s volume coming through your business however what effect does that have on the margin of your core products. It can hamper the cashflow within your business, to discount your products or services to a level where, it makes it makes your business viability unsustainable.
How often do you look at the true cost of discounting to your business?
Most accounting systems don’t show us the level of discount that gets carried with each of our products.
Net sales value, after the discount has been applied, is what gets recorded in the sales ledger. We don’t see how much we are giving away at any point in time, unless we look deep into the figures behind the sales figures in our accounting system.
How is your business viewed by established and potential clients?
Customers develop a level of expectation that you will always offer a discount to ensure you get their business. What can we do instead to add value to the transaction?
We need to add some creativity into our thinking, to ensure the best outcome for both the client and your business. Get your sales team together, put the question to those that sell your products every day and brainstorm.
Look at like-minded businesses and at those that are not related to what you do. Ideas to inspire connection with your clients can come from the most unusual sources. Just because you have always done business in that way, doesn’t make it smart business practice.
Discounting can often come at a detriment to the perceived value of the product or service that you offer. Sometimes, we need to be brave and go to the source and ask them what their level of expectation is.
What would they see as a value proposition, to encourage them to purchase? Value concepts that we often overlook – knowledge, honest advice, comfort of shopping in a familiar environment, relationships that have been developed between your staff and the end consumer, often rate higher and mean more than discounts.
The challenge going forward is to get creative, think outside the box and offer discounts on a minimal basis. Know the impact that discounts have on your numbers – awareness and understanding is key. Fear driven decisions are never sustainable.
Add value to every transaction by building relationships, find out what your customers truly value and be the go-to business within your industry.
Be unique – don’t follow the crowd!
Getting a head around this is a big step, in understanding how we can move forward and better understand the position of her business.