Many executives believe that they must offer discounts to get a deal. If they don’t offer a better price, the customer will go to the competitor, they reckon. But in reality, this isn’t necessarily true.
As a business owner, your fiduciary duty is to maximize profits. Decreasing discounts granted is the fastest way to increase your profitability. But the problem with offering customers discounts is they come to expect them and want a deeper one the next time.
Here are some ideas to help you close better deals.
Before I get to some specifics, here’s one axiom that I always insist: Every deal must be profitable or strategic.
Tell yourself again and again that every sale needs to be profitable or strategic. While you’re trying to solve customer problems, you should also be making money or increasing the long-term value of a customer relationship.
The reason for discounting is to either to steal a deal away from the competitor, increase the value of the customer’s relationship with you, or to increase your sales volume to generate additional cash flow to take advantage of production efficiencies.
Read on to learn six ways how you can decrease discounts and increase sales.
1. Make Customers Earn a Discount
Salespeople often make the mistake of saying, “I can give you a discount.” The problem with the word “give” is that a discount becomes a gift with no strings attached. It degrades the impact of a discount and requires nothing from the customer in return.
Stop saying to customers, “I can give you …”
Instead, when asked for a discount, tell them how to earn it. “When you buy 10 units, you’ll earn a 5 percent discount.”
If they want more of a discount, they can earn it by buying more.
2. Increase Value Instead of Discounting
A better approach to pricing is to hold your price firm and add value. What can you throw in that sweetens the deal, adds value for your customer and helps you sell more of what you’ve got?
A good deal sweetener is something your customer hasn’t bought before that you want to introduce to them to. You get the double benefit of closing the current deal and set up the next purchase.
Remember: Every sales pro needs deal sweeteners in his or her pocket.
Another way to add value is to throw in something you’ve got lots of that you want to move. You get to move old inventory and keep the full price on the original product.
Don’t toss in anything that is scarce, costs you a lot to deliver, or is of high value to your customer. There’s no reason to discount things people want.
Make sure that your customer knows the full value of what you’re adding to sweeten the deal so that they understand the value they’re getting.
3. Bundle Up
Offer a better deal on the bundle than on individual items. This works well when you can bundle a product together with an item sporting a higher margin. Bundles move up the size of the sale to you and increase the value to your customer. In other words, everyone wins.
What else do they need? Bundle it in.
If you want a picture, consider what a paint store owner might say to a typical customer: “I won’t discount the price of a gallon of paint, but buy this set of brushes and I’ll knock 5 percent off the whole lot.”
Ideally, bundles bring together everything that your customer needs to solve their problem so that the deal delivers convenience and success.
4. Buy More, Get More
A great way to increase your sales is to offer a better deal on a larger quantity or on a bigger order. You’ve probably seen this at grocery stores; they might offer one item for 99 cents or three for $2.49.
The rationale is that the price includes the cost of sales, shipping, handling, marketing and so forth so when one customer purchases more, there are fewer of these costs associated with that one purchase.
To increase sales, set your discount threshold slightly higher than the average sale.
You also can offer more value at a purchase quantity threshold; for example, when ordering online, for purchases less than $49, you pay for shipping. Buy more and get free shipping.
5. Credit for Next Purchase
Offer a credit your customer can use on the next purchase. This method holds the price today but offers a deal on a future purchase.
“When you buy today, you’ll earn a 5 percent credit toward your next purchase that you can use anytime other than today.”
It’s often worth a small incentive to get customers coming back. It’s also a way to allow the customer to perceive that they’re getting a deal without impacting an established price and associated value. Trust me, your margins will thank you.
Ultimately you only forgo the margin on the credit amount instead of giving up the whole amount — and you keep all of your margin today; plus, the customer has to come back to claim their discount.
Put an expiration date on the credit so that your customer will purchase sooner than later, adding to your short-term sales volume.
Rebates can help protect your price by making customers apply for a discount.
After the purchase, customers complete an online or mailed-in information form with proof of purchase to receive a rebate, often in the form of a gift card, a check or a discount coupon.
Rebates feel like a deal in the moment, but you keep all the margin today.