Home Articles Stop undermining your own business. Why discounting is a bad idea

Stop undermining your own business. Why discounting is a bad idea


Do you undercut your own business?

Do you cut prices, and give up your margin, because you don’t know how to say ‘no’?  If you do, it’s time you realise that it is no good for anyone — not you, your customer or the industry. 

The practice devalues you, your product, and your market. When done on a mass scale, this leads to customer expectations of a bargain all the time, and a lack of customer appreciation of the real value of the products or services they buy.

Seventeen years ago, when I was starting my own business, I needed an admin person and didn’t have the time to find one myself. So I met a recruiting consultant. The meeting went well and I thought she would do a good job for me.

So I asked her how much her fees were. Her immediate response, with no prompting me, was this: “Oh, it’s 12% but you can have it for 10%!”

I was shocked. Not only had I not bargained, I hadn’t said anything to remotely indicate I wanted a discount. I would have gladly paid 12 % but instead took advantage of the discount. The recruiting consultant was clearly undermining herself and her business by simply assuming that I would try and beat her down on price.

Now this is a lot more common than we realise or, perhaps, acknowledge. Let’s face it; there will always be someone offering their products or services cheaper than you.

But are they offering exactly the same product or service as you? Make sure you know how you compare to the competition. It’s worth it. Make sure you compare apples with apples.

Establish value, not price

So, what is the real price of things? Why do so many sales people undercut prices all the time?

When sales people continually do this, it can leave the customer questioning the real value of what they are getting, not to mention questioning the trust of the seller.

Your prices need to be fair and well calibrated in the marketplace.

You need to be firm because more people than not are willing to pay the recommended price.

You need to be able to stand your ground and know how to prove your value.

There will always be people who will drive for cheaper pricing. But as long as you have enough other prospects and customers to work with, you don’t have to bow and scrape to these price shoppers. Focus your effort and concentrate on the customers who are willing to pay.

Don’t forget that the price is just an arbitrary figure until it is ascribed a value. It means nothing in and of itself. Sure, the pricing of your product or service needs to be pitched at the right market level. However, make sure you can articulate the value of your product or service offering using real evidence.

If you do your homework you might find that you are selling yourself, your products and services too cheaply. Here are some hints to avoid that happening.

1. Make sure you know how your products and services compare and contrast with that of your competition.

2. Make sure you fully understand what the customer needs and what they value. That is the way to build a sound business case and make sure it has an economic case to justify your price point.

3. Know your Return on Investment.

4. Stand up for your business. Do not fear confrontation or conflict. Be proud of what you do and tell your customers you do not discount unless it is based on volume.

5. Do not give away things to be “sweet” to the customer. Customers will not respect you for that. Instead, they will try to take more advantage out of you.

Equally important for your business is the need to learn to sell to the “right” customers. You can do this easily. Identify a “viable” customer – someone who can buy from you right now for the right reasons. Make sure they have the following three conditions operating simultaneously:

  • Money — the willingness and ability to pay for it;
  • Authority to make a decision; and
  • A real need for your product or service

If so, then sell to them. If not, move on and find another set of customers, but make sure you leave the door open so they can come back to you when things change

Sue Barrett is a sales expert, business speaker, adviser, sales facilitator and entrepreneur and founded Barrett Consulting to provide expert sales consulting, training and coaching.