Everyone likes a bargain. Why pay full price for something when you can receive a discount? This is why discount websites are gaining popularity. They’re great for the consumer, but are they good for the merchant and small business owner? As a small business owner, have you worked out the real cost of discounting and the impact it will have on your business? Daily deal websites charge a fee of approximately 15-20% of the sale price and stipulate that the offer presented must be at least 50% off the original sale price.
It’s common to think that by offering a discount you’ll attract new customers. That may be true, but have you considered the bigger picture and the long-term effects that discounting will have on your business? Low prices may drive sales for a limited time, but they don’t help build customer loyalty and discounts cost money.
The hidden costs of discounting
By reducing your price just by 10% on a margin of 40%, your sales have to increase by 33% in order to make the same profit. That’s a big ask in a competitive market, especially when you add a fee onto that. Discounting can put you quite far off your sales goals.
Pursuing a discount pricing strategy increases the chance that your product will be perceived as lower in quality, impacting your brand and ultimately your bottom line.
So, if you’re considering going down the discount route, do the sums first. Does it pay to offer discounts both from a profit and customer perspective? And consider this – are your customers loyal or are they just hunting for the next deal?
Find an alternative to discount sites
Bartercard is not a discount service and while there are fees associated with being a member of the network, it’s small in comparison at 7.5%. Bartercard allows members to grow sales by 10% or more within the first 12 months of becoming a member (Dot Loves Data, 2014) – no discounts are required!