10 Discounting Do's and Don'ts

Business.com / Business Solutions / Last Modified: February 22, 2017

These days, if your business isn't offering a discount of some kind, you might not be selling much at all. Pervasive discounting spurred...

These days, if your business isn't offering a discount of some kind, you might not be selling much at all. Pervasive discounting spurred by the sickly economy has caused buyers to demand deals on anything and everything. In the midst of all this, how do small business owners craft a promotional strategy without losing their shirts? Whatever you call it - a sale, clearance, liquidation or special event - here are 10 do's and don'ts for successful discounting:

10. Do make the discount relevant: Devise an offer that not only will appeal to your clientele, but also one that jibes with how those customers buy from your biz. For example, notes Amy King, vice president of business intelligence at Valpak, a major coupon mailer, a "buy one get one free" offer may appear strong on the surface. "But if your customer wouldn't typically buy multiples at the same time, it's not likely to work well."

9. Do commit to your campaign: Whether you use postcards, coupon packs, email or online ads, frequency and consistency are important. Prospects may see an offer but not respond right away. "Consumers look for an offer that's appealing and has value, and may respond immediately. But with big ticket, high-commitment items they are likely to take more time to consider the offer and wait until they need to make the purchase," says John Widmer, Valpak's audience research manager.

8. Do balance strong discounts against your bottom line: Structure discounts that can get customers in the door, but still make money for your business. "Look at your product mix and look at your margins," says King. "Because if you don't, that's where you're going to get burned." Evaluate carefully what you can reasonably offer, and don't be afraid to exclude specific items that don't fit the discount model.

7. Do set goals: Balance results with objectives. Was your goal to generate new customers? Drive more phone calls or website visits? Promote a new product or service?

6. Do monitor and measure the results of a discount strategy: If you sell more but still lose money, it's not helping your business. Don't just file away coupons you use to promote your discount. Take a little time to analyze the transactions. Did customers merely buy the discounted items or did they spend more while they were at your store or website? Well-planned discounting typically (though not always) prompts customers to spend more.

5. Don't cut prices willy-nilly: In the midst of all this, how do small business owners craft a promotional strategy without losing their shirts? The kneejerk reaction is sometimes to cut prices willy-nilly. But King warns businesses not to rush into a discount strategy. "Start with a plan," she says, "and then stick to it."

4. Don't forget to prepare: Some businesses that offer a discount for the first time aren't properly prepared for the response. If you attract customers to try your product or service, but you're not able to serve those customers at your best level, you're shooting yourself in the foot. Be sure to inform your staff about your discount strategy, and provide any information they need about coupons or offers. Customers may have questions, and you'll need the answers.

3. Don't treat people who buy at a discount as "second rate" customers. "Make them feel wanted, welcomed and appreciated," says King. "Training your staff to handle promotions is just as important as the offer itself." Treating people well is the key to repeat business after the discount deal is gone.

2. Don't target only new customers: Offer extra discounts for repeat business: One way to turn new customers into repeat customers is to establish loyal customer discounts of some type. Loyalty cards (buy 9 get the 10th one free), birthday discounts and referral rewards are several examples.

1. Don't get yourself in hot water: Be careful with the wording of your discount and on-sale offers. Clearly label what's "on sale" and what isn't. If you advertise discounts of, say, "Up to 50% off" the Better Business Bureau suggests that at least 10 percent of the items be offered at the maximum amount off.

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