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Profit Boosting Tip - Don't discount!

It's very tempting to cave in when you are faced with a customer pushing for a discount. But it’s a dangerous step to take for your business for several reasons. Firstly, that customer will always assume you are going to offer a discount in the future. Don’t think they will pay full price next time – you have just set a price limit in their mind. Secondly, word gets round very quickly these days and people will assume you will discount for everyone else too. Effectively you damage your brand and become seen as a cheap option rather than a value or quality one. Thirdly, someone else can always undercut you. Unless you are absolutely sure that your business model is so different that you can always offer dramatically cheaper than everyone else, your competitors can always undercut you. And if you are dramatically cheaper why on earth would you discount further?!

And last, but by no means least, you make it harder to make profit. It comes back to the fact that most businesses should be driven by profit not revenue. Think about the numbers. If you want to make 10k profit and make £100 on each product you need to sell 100 of them. Now, if you suddenly discount that product and lose £20 of your profit you need to sell 125 to make the same profit overall. Yes, you may lose a few sales by holding your nerve – but will you really sell 25% more if you discount. Unless you are really sure, don’t discount.

Of course it can be hard to hold your nerve, especially if business is tough. But one of the reasons business might be tough is that you keep knocking down your prices. You need to be competitive and make sure you are clear on your offer – but constantly knocking down your prices is not the answer to your business problems.

If you absolutely must go down in price, find some clever ways to manage this. For example, explain how the product or service will change to reflect the change in pricing or throw in other products or services that cost you less as bonuses to hold the original price. Or reduce the price in exchange for some commitment on their part – higher volumes, longer term commitments, quick decisions and so on. Focus your discussions on value that people get for your product – for example better service, expertise or relationship. Don’t fall into the trap of setting your business up as a cheap product offering – or your profits will suffer in the long term.

Take action now – hold your nerve on your price and find another solution and click on the link below for more profit boosting tips.

 

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