I want to offer my best clients price cuts, but how much of a discount is too much?
I know that offering discounts is a great way to ensure loyalty, but I also want to make sure that I'm not losing money on my best customers. How do you tow the line between encouraging loyalty and offering too much of a discount?
a loyalty or reward program(or gift from coopertaing business) would be best as opposed to offering a discount
Remember, discounts do not necessarily guarantee loyalty. Great service, perceived value and trust, do. If you are feeling as though you want to give back to the customers that are loyal to you, that is one thing and there are several creative ways to do so. Its the little things that count. If you are struggling with obtaining loyal customers that is entirely different and you could take a look at your existing business and explore the reasons why that is. As a rule, it all connects back to beginning, people want to feel they are getting value for their money, they want to trust who they are doing business with and want service that goes out of the way to fill their needs.
What you propose will not have the result your expect. Many here are telling you are giving away money. They're right. The psychology of price suggests that discounts give the market the impression you offers are worthless. If you want to ensure loyalty, deliver exceptional customer service. Call them up personally and thank them for doing business you. Ask how you can improve because you value their insight as a customer. You will get closer to loyalty with an approach like that or something similar to it rather than discounting. Trust us. Do not give money away.
Don't give price cuts! This cheapens your services and makes you look unprofessional. Offer your customers more perceived value instead. Offer additional services that are cheap to you and pass them on. Never give a discount and expect to seriously increase your loyalty. They will only be sticking with you because they think they will get more deals out of your and it will become one big revenue draining spiral. Increase customer value!
Loyalty to a product, service or company always comes down to value. Each of your best clients sees value in your product and you need to identify what that value is for them as your way of ensuring their longer term loyalty. Unless you're in a highly commoditized market, discounts are only sometimes the answer to keeping your happiest clients happy.
- Ask or find out what your best clients love about your offering
- If it's service: ensure that they work with your best support team members, offer free trainings or simply send a card and gift saying thank you for being a great customer from their service rep
- If it's the quality of your product: keep them informed of new offerings coming down the pipelien, give them an offer to be a beta tester for new features
- If it's price: discount with caution, >30% can indicate that your pricing is inflated to begin with, when you discount be sure to attach it to a why and set a time limit for the length of the discount
Instead of price cuts, have you considered offering something extra to them for their recommendation to others? If they have been loyal customers, that probably means that they like your product/service. While they may have mentioned it to friends, many times people do not do so unless there is just a bit of a nudge or incentive. Or, you could offer price cuts if they have a few friends that actually buy your product/service. Then, technically you wouldn't be losing money since you're also gaining new customers.
You have received great advice below...so I will just add a question to your question...who ever told you that offering discounts ensures loyalty? Yes, I am being direct here.
What it does ensure is consistent discount requests...which will only ensure your current customers not accepting rate increases.
Rob, you have some great advise.
the standard rule is do not give anything away without getting something back in return.
If someone is asking for a discount, always get an increase in quantity to off set the loss.
Without knowing your business, it is hard to be specific, however there are other ways to enhance the level of loyalty, while at the same time making the loyal customer feel special.
In most business there are 4 main pillars. Price, Product, Supply, Service.
Usually he customer wants all 4 Price the lowers, Product the best quality , Supply always in stock, service, delivered the same day. This is very difficult to achieve, in fact it's just about impossible.
But what I have found is for your best customers, you should talk to them, to see which aspect other than price and product (unless you are manufacturing) has the greatest impact on then if not delivered.
Tell them that you are considering implementing a higher level of service in recognition of our top tier customers. In light of this, what is it we could do to make your experience with us easier or better.
Have them tell you. it maybe something simple like having a dedicated internal contact, ensuring you keep enough stock on hand. (you could ask for forward orders to cover that) or some other simple thing.
Remember if they are buying from you and have been for some time, you must be doing something right.
One of the WORST things i did when I first started working for myself was trying to match prices of others and coming in lower than I should just to get work.
WHAT IS YOUR TIME WORTH? Figure out what you are worth, what your time is worth, and why it is worth that. Build value, don't cut your prices.
You've gotten some pretty good advice from the others.
1. Selling on price alone is a failed strategy because there will always be someone willing to sell a product for less than you. And as Brian Jeffrey stated consumers who buy based on price have no loyalty to a retailer or brand.
2. Developing a loyalty program, like anything else in your marketing mix, it comes down to what you are attempting to achieve.
3. Are you selling a service or product? There's a big difference on how to approach loyalty and 'discounting' between the two. With a service its all about how much do you value your time because it is the only resource you have and it is finite. Once you sell those hours at a lower price they are gone and can't be made up.
With products is comes down to profit margin and how much of it are you willing to give up. For example, a restaurant may give you a free sandwich after buying "X" number of sandwiches or a free desert for referring "Y" customers. They can do that based on the cost of product versus the amount of profit earned from the previous sales.
More companies, especially in the retail space, are going to a rewards programs that earns a consumer points based on the amount of money they spend at the retailer.
4. You have to think in terms of the customer lifetime value and how you can maximize there value.