|
With the world and his wife discounting everything that isn’t nailed down I thought a few comments on how to control discounts would not go amiss.
First point. You are NOT discounting your prices. You are discounting your PROFITS. So you owe it to yourself (and your shareholders) to manage discounts effectively.
Rule no 1. Don’t offer discounts automatically. Wait for them to ask. Most people will, but not all. If you offer everyone, everyone will accept.
Rule no 2. Make small moves. “10% discount not enough, OK I’ll make it 20%” Rubbish! What happened to 12%? Or 13.7%? Why double the discount in one go?
Rule no 3. Big one, this one. Make sure your customers do not get used to discounts or low prices. They should be short term, withdrawn without notice. Many big retailers are making huge mistakes by sending out a message that discounts are permanent. Customers will not only get used to them, they will become the norm and then the customers will want bigger ones.
Rule no 4. Make discounts personal, not to everyone automatically at the same level. Only to this customer for these products, but the next customer different products. And different discounts for different customers on different products at different times.
OK, OK, I know this will take a bit of work and thought. You need to figure out which of your products will have more pricing power with which of your customers. But there’s a recession on, everyone is complaining that they don’t have enough work (not us!) so maybe you should invest some of this time in improving your profitability, and getting a grip on discounts is as good a place as any to start.
Martyn Swan
martyn@profitbuilderint.com
|
