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Lots of people love discounts, they love to get a bargain, unless of course they bought an item for full price last week and this week it’s at a discount rate.

The challenge with discounting from the business perspective is it means you have to sell more to make up for the margin you lost in discounting the price. If your competitors do it you might be tempted to do the same to try and retain customers and keep you r business afloat. It seems like a reasonable strategy until the bottom falls out of the market or things change (online shopping being one.)

Businesses face pressure internally if they can’t compete and most seem to end up following the discount route. Some will already have inflated prices and the discount ‘looks good’ but is no big deal to the business. For those without the ability to start with an inflated price they can soon end up in dire straits.

Then there are the business sectors where the competitiveness gets to be a real killer… “I can get a person to do this job for $10 less per hour than you are quoting.” before long it becomes a bluffing game. “May the person with the detailed written quote please stand up…” and if you are competing you would probably want to get the quote to make sure that what you are offering matches the other quote. “Apples aren’t apples if they’re oranges”

Discounting might seem to work for a while then it gets to a point where those who go down this route feel the pressure of lower income and before long may even go out of business as the margins vanish into thin air.

Manufacturing countries with cheap labour have fallen for the discounting trap, sure they may be able to offer lower labour rate than other countries, but some research on their behalf could have given them a clearer picture of where to pitch their prices. Alas they did not and simply grabbed what they could at the time, our buyers snapped up the bargains and now we have little margins and big turnover of product to try and make up for the slim margins.

A vicious circle ensues and before long the pendulum swings and a cheaper country emerges and pushes the other out. Business becomes cut throat again.

I guess there has to be some form of happy medium, where the price provides a reasonable margin for the business to keep going and thrive as opposed to a business on slim margins who might struggle to survive.

In the end good service and products should be the aim, with the quality is remembered long after the price is forgotten. However this seems to not be the case.  Businesses have to strive to be unique and do battle, hopefully without having to resort to discounting and the challenges this provides.

Steve Gray -

Steve is a business educator – Trainer – Speaker (Steve Gray.biz). You can get his Leadership E Book from http://theleadershipguy.com.au
The info provided in these articles is for educational purposes only and is intended as a starting point for you to build your business from, not as specific advice.


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