Discounts Are Still For Dummies!

A long time back, I wrote up the original piece on my resistance to discounts.

Some friends of mine have had the audacity to talk about the “right time to discount” with me over the years and as we move through the pandemic, especially in the world of tickets, I see a willingness to rush back into discounting once again.

Let’s not do that.

Once again, with fresh, pandemic tinted eyes, let’s look at why discounting is for dummies!

Price is still a signal:

The first thing you have to keep in mind about price is that it is a signal, most of the time the buyer doesn’t even know they are receiving the signal. And, in many cases, they don’t recognize that the signal is impacting them in the way that it is.

So as strange as it is going to seem for me to have to reiterate this, people believe that they get what they pay for.

Which leads to the big point that if you are discounting that sends a signal that you don’t have confidence that your product is worth the price you are charging.

Discounting is often a signal that you don’t have a good strategy:

This one is important because you can’t effectively use tactics to fix a bad strategy.

You’ll only end up digging your hole deeper than before.

If you don’t get your price right at the start, you are signaling that your strategy is off and that you are scrambling.

Discounting is a clear indication that your strategy is beat.

So get pricing right at the start.

Discounts turn your brand into a commodity:

Since a lot of folks in tickets are wed to the idea of discounting as a way to paper the house in the best of times, the idea that discounts can be used coming out of the pandemic has started to creep into conversations and I want to disabuse you of the idea right now.

If you aren’t using the shutdown from the pandemic to revisit your strategy and the tactics you use to deliver on your strategy, you are going to get what you deserve on the other side of the pandemic.

As I’ve seen studies done on pricing across industries through the pandemic, I’ve learned a few things:

  • Discounts erode your brand equity. Leading to price resistance.
  • Discounts break the promise you’ve made with your customers.
  • Even using tools like dynamic pricing have to be used selectively to ensure that you don’t end up breaking the brand promise and undermining the brand equity.

Discounts destroy your profits:

Here is your big number: 40.

What does it mean?

For every 1% you discount, you eat into your profits by 40%.

There is a tendency to do a lot of things poorly in pricing because many businesses have eroded the power of their marketing teams to get involved in the pricing discussion and this causes bad pricing decisions.

The worst two things that happen around pricing are:

  • Discounts
  • Pricing by sticking your finger in the air to try and figure out which way the wind blows

Both of these can lead you to end up with a price that isn’t related to the market and can put you in a position where you are discounting to try and make up for some bad decision made at some earlier point in the process.

I’ll cover the other things and pricing properly another time, but the first thing to remember is when it comes to discounts…DON’T!

Discounts are still for dummies! And, they will cost you profits, brand equity, and differentiation!

Just don’t do it!

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