Comments on: The forgotten cost of discounting

By: Robert Clay

Robert Clay — Fri, 09 Dec 2011 21:23:20 +0000

Hi Rod,

Apologies for the delay in responding. I have been away for a few days. I agree that there are times when discounting is appropriate, or strategic reasons for it. As you say, there needs to be a sound reason for applying it. I will have a look at your LinkedIn company page.

By: Rod Stobo

Rod Stobo — Tue, 06 Dec 2011 18:49:05 +0000

Robert, I’m concerned this makes discounting sound like a mistake in all cases. For multiple product or SKU companies, discounting can be an effective way to encourage trial, increase basket size, turn slow inventory, or fix an error of purchasing. Even in single product or service companies, discounting, I believe, can be an effective way to attract new customers and even to gain or foster loyalty (I sure know I appreciate it when a vendor to whom I’m loyal offers a discount from time-to-time and I don’t think I automatically expect that price forever – I think it’s all in the way the vendor sells it).

To your point, however, the challenge may be in knowing where discounts are being applied needlessly and killing margin. I work for a company that helps manufacturers improve profit, and discounts are an area we frequently look for sources of margin leakage, so they’re definitely something to keep an eye on. I think it’s a matter of having a good, sound reason for applying them rather than just avoiding sales rejection.

Regardless, it’s certainly a good discussion to have, so I’m going to post a link to your article on our LinkedIn company page along with some of my arguments – hopefully get a discussion going!

Thanks,

Rod.

By: Gresat Article posted by Persianista on FB .. everyone should read it!! - Salon Geek

Mon, 01 Aug 2011 20:51:05 +0000

[...] Gresat Article posted by Persianista on FB .. everyone should read it!! – Today, 09:50 PM As the title says …. LEARN from it! The forgotten cost of discounting | Marketing Wizdom [...]

By: Robert Clay

Robert Clay — Tue, 14 Jun 2011 08:54:30 +0000

Thank you for your excellent comment. While I agree that discounting is rife, I also wonder what that’s doing for the long term survival of those businesses. Apple, Waitrose, John Lewis and others, have shown that people will happily pay for really good products and services … the secret is to put the customer first; abide by a set of values that do that; add as much value as possible; and educate people so they appreciate the value they’re getting. Do that and you won’t have to descend to the “pile ‘em high, sell em cheap” approach that is probably killing a lot of the businesses who practice it. You also get that hard core of committed customers. Make sense?

By: Unique Oxford

Unique Oxford — Mon, 13 Jun 2011 16:05:19 +0000

Interesting article – interested to hear what your take is on our main bone of contention, which is that the “pile em high, sell em cheap” approach is what seems to be powering the growing dominance of the major chains.

Your points about the discount customers, who shop on price, are very true, and yet these seem to be the norm nowadays. We try to educate people that there are hidden costs when they use nationally recognised brands – who keep prices low and discount lots by pressuring suppliers and then by dominating the marketing sphere, they prevent smaller businesses from getting a word in.

Of course, most locally-focussed businesses will have a hardcore of committed customers who continue to shop there for the quality of the product, the service and the knowledge they are supporting a local business. But, if these customers are growing more rare (and in these straitened times, they do seem to be), what can smaller independents hope to achieve when confronted by the aggressive tactics of national chains and a growing proportion of customers shopping according to price?

Fascinating articles, as always.

By: Robert Clay

Robert Clay — Mon, 18 Apr 2011 14:48:01 +0000

The book business is clearly under a lot of pressure right now and a lot of traditional publishers—and their traditional retail distribution channels—are already finding it hard to survive. They may discount to maintain sales. But they will likely only hasten their demise by doing so. Discounting is corrosive in any business environment. They need to get better at marketing and using all of today’s channels to add value so that people are prepared to pay a commercially viable price for the product. They will have to go through the same process of reinvention that just about every other business is having to go through right now as our business landscape changes.

By: aly monroe

aly monroe — Fri, 15 Apr 2011 11:37:30 +0000

Interesting articles – I would be fascinated to know your views on how this applies to the book business …

By: Robert Clay

Robert Clay — Thu, 24 Mar 2011 11:50:38 +0000

Thanks for your thoughts Doug. I’m entirely with you on the 37 Signals approach. They have an amazing model, and the products are excellent too. They have been a mainstay of our business for some years and I am always holding them up as a role model in the SAAS arena.

By: Doug Wagner

Doug Wagner — Wed, 23 Mar 2011 18:57:45 +0000

This analysis is also very relevant to the software as a service business model. Many companies get a pot of money, then give away their product for free. This trains their “customers” that the product has little real value.

Then when the money runs out or the investors want their profit, they are forced to start charging. They’ve attacted the wrong customers, so they lose most of them or create a severe backlash.

I like the approach of 37Signals. Create a product with value and then charge enough to make your profit. If you can’t sell it, it doesn’t have enough real or perceived value.

The math around discounting is amazing. Going to share this with my business partners. Thanks.

By: Robert Clay

Robert Clay — Thu, 17 Feb 2011 08:13:13 +0000

Hello Maxxy, I appreciate your taking the time to leave a comment. Thanks.