Discounting vs Value Adding

A couple of questions I often get asked when working with a new business owner are,

“How much should I charge” and “Should I give discounts”

The first question all gets back to knowing your own worth and this you can read in a previous blog. The second question is a tricky one as yes discounts do have a place within a business model but if they are not used strategically they can be the downfall of your brand.

A discount, offering a product or service at a reduced price to what you would usually is useful for when you need to clear old stock or wanting to reward customer loyalty but remember it can also affect your profit margins.

When starting out in business it can be tricky as you want to gain traction in the market, awareness to your band and be competitive but you do not want to give up your opening profits.

This is why I always suggest the solution to value add to the product or service being offered rather than discount. Consider ways in which you can make a product or service more attractive to the consumer, for instance many online businesses offer free postage on orders over a certain amount. This is savvy as not only are they adding value to an order, but they are ensuring a dollar figure is being spent to achieve this. Other examples may include gift wrapping or throwing in another compatible product eg purchasing a diary and receiving a pen. Car retailers often use free registration or a tank of petrol, a hairdresser may throw in a free blow dry.

Value adding to your product or service still comes at a cost to your business, although a lot less then discounting, but the biggest benefit is you are protecting your brand and your profits for the long term.