Why DISCOUNTING may make you more sales but less money!

by Raydal
18 replies
I first heard this concept from Dan Kennedy, but have gone against
the advice in my own marketing only to see that he was right.

Discounting should be the last resort in your marketing bag of tricks
to make more PROFIT.
It may bring you more customers in your
funnel but there is a better way to make more PROFIT. Keep your
product at the same price but ADD MORE VALUE instead of lowering
your price.

Now I notice that anytime I give a discount to my products the quality
of the customers decreases. Here I am defining "quality" as the willingness
to spend more money with me. It also decreases the perceived value of
your product in the eyes of those who got it at that lower pricing.

Now I know I'm preaching to the wrong crowd because the WSO is
filled with products racing to the free line until the recent change in
policy. But just like I rejected this idea when I first heard it you may
want to give it a second consideration.

Here is a great article where the numbers show the DK was telling the
truth.

How Discounting is Killing Your Pricing Strategy

-Ray Edwards
#discounting #idscounting #make #money #sales
  • Originally Posted by Raydal View Post

    Now I know I'm preaching to the wrong crowd because the WSO is filled with products racing to the free line until the recent change in policy.
    Yeah well,

    The quality, or actual dollar value of those WSO products has always been questionable anyways.

    I rarely if ever saw a legit "regular price" vs "discounted price" on a WSO,
    as most were almost always just made up.

    Sure, their "1 page" report is now only $7 but normally it sells it for $47 and it's going up to $97 soon! Right!

    So yes, those products might be worthy of a "perceived deal".

    As for discounting high end products,
    many retailers (for decades) will beg to differ, and yes even with the great Dan Kennedy.

    Putting quality items on sale will drive traffic, and from retail experience in my former offline life, it does not always translate in less money overall.

    But I can see areas where your post applies...
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    • Profile picture of the author BigFrank
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      If I don't make a sale I get zero money. If I offer a small discount and make a sale, I make money.

      This is America. People are programmed to expect discounts. They are offered in almost everything we encounter in daily life.

      I always set my prices a bit higher than I actually want, expect a request for a discount, arm wrestle but ultimately relent and everyone is happy.

      The secret is to not give away the store.

      Cheers. - Frank
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    • Profile picture of the author Raydal
      Originally Posted by stoltingmediagroup View Post

      Yeah well,

      As for discounting high end products,
      many retailers (for decades) will beg to differ, and yes even with the great Dan Kennedy.
      From the article referenced above:

      Everything is rainbows and sunshine now, right? Well, no, not at all actually. By discounting you've conditioned the customer to de-value your product. Discounting works in the retail space so well, because brands can limit supply (or at least make it look like supply is limited), and therefore create a sense of urgency in the eyes of the consumer. In the software space, supply is practically unlimited and non-physical, and we're inundated with so many promotions and discounts every day that we know more are coming down the pipeline, even if you say, "for two days only."
      So, yes, there are exceptions.

      -Ray Edwards
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  • Profile picture of the author Brent Stangel
    I always set my prices a bit higher than I actually want,
    Something I learned a long time ago, and not from DK.

    It is impossible to make blanket statements about something as diverse and dynamic as marketing.

    In the end it's the bottom line, which path makes all the big numbers run to the left?

    Test,test,test! - That's twice today...
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  • Profile picture of the author icoachu
    Ray,

    Great post.

    When you lower your price, you give people REASON to DOUBT the value you bring to the table.

    Sadly, most consumers have a simple rule when dealing with DOUBT about deals and opportunities:

    When in doubt, stay out!

    Charge a premium so what you offer can be viewed as a PREMIUM OFFER.
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    • Profile picture of the author BigFrank
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      Originally Posted by icoachu View Post

      Ray,

      Great post.

      When you lower your price, you give people to DOUBT the value you bring to the table.

      Sadly, most consumers have a simple rule when dealing with DOUBT about deals and opportunities:

      When in doubt, stay out!

      Charge a premium so you what you offer can be viewed as a PREMIUM OFFER.
      Everyone sells differently. I do quite well utilizing my techniques. I wouldn't change a thing. When you've been doing it for 50+ years, your take on the subject might have more significance to me.

      There is no 'one way' to do anything. Creative thinking trumps rigidity, every single time.

      Cheers. - Frank
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      • Profile picture of the author Rustyknuckles
        Instead of offering a discount, how about a sales premium for first 10 orders or in the next 50 minutes? They are cheap promos that have some perceived value way above your cost. Vacation Certificates - Increase Website Traffic - Boost Sales I am not affiliated or have I used it, but it gets my idea across. How about offering a free 15 minute live consultation with you on your product then up sell them. Just some thoughts.
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  • Profile picture of the author Raydal
    As I said before I made the "discount" mistake before and lost a ton load
    of money. By the time I caught myself, I think it was a little too late.

    I had a product that was selling really well and by the time I realized
    how much people were willing to pay for it, most of the potential
    customers were already customers. What I did later, instead of
    discounting, was add some extra value and the CONVERSION
    rate remained the same as the discounted price, but as I said,
    I had already lost a lot of sales at the price.

    But if the WalMart strategy works for anyone of course use it.

    -Ray Edwards
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  • Profile picture of the author Gino Bulova
    We all love a bargain. We love when we can get something of value for less, But if you think lowering your price would be a win-win situation. Not necessarily. Not always....
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    • Profile picture of the author BigFrank
      Banned
      Depends on what you're selling. Comparing apples and oranges is an exercise in futility.

      The only thing worse is making blanket statements. Small discounts have helped me grow my business and the relationships that I build by utilizing them afford me an opportunity to recoup anything I may have given up on the original sale.

      I'm in it for the long haul. Some of my clients have been with me for over a decade and one of them for two decades. Like I said, what I do works for me, but everyone's situation is different. To infer that anyone that offers a discount is 'wrong' is beyond ludicrous. :-)

      Cheers. - Frank
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  • Profile picture of the author Lance K
    Look at Udemy courses. They have 90% off type promotions so often that I'm conditioned to never pay list price for a course on there again.

    Then again, as Frank mentions, there are some legitimate instances where discounts may be warranted (customer acquisition, reactivation, moving discontinued inventory to free up cash flow, etc.).

    Having said all that, if you don't do everything in your power to protect your gross margin, you could end up in financial trouble. It is possible to sell yourself broke (moreso offline than online).
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    • Profile picture of the author icoachu
      Originally Posted by Lance K View Post

      Look at Udemy courses. They have 90% off type promotions so often that I'm conditioned to never pay list price for a course on there again..
      Exactly. They violated one of the basic rules of marketing-segmented product brands.They basically educated people as to the 'real' value of their courses.
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  • Can't agree with you more Ray.

    I've tried making discounts on some of my products and my sales remained the same or sometimes dropped.

    I remember on one of my niche products, I had priced it at $47 for 2 years and it was selling well. So I decided to make a discount and sell it at $17 just for testing. I still made sales but I got one customer who bought it at the discount price that told me my product was wack and she could have got the information for free on her own.

    Now mind you through out the years of selling it at $47 I had never got an unsatisfied customer, now at $17 I get one.

    So now I never make discounts, the only thing I've done to increase my conversions is add more value to the product like bonus ebooks that compliment the actual product.
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    • Profile picture of the author BIG Mike
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      • Profile picture of the author BigFrank
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        Originally Posted by BIG Mike View Post

        Personally, I think Apple and Microsoft are probably the epitome of why rigid pricing and not discounting is an epic fail.
        I don't know why you say Apple's pricing is rigid. I buy Apple products on a regular basis and always get anywhere from a 10% to 15% discount on brand new computers and peripherals.

        Oh, wait. That's right. They don't give it, until you ask. :-)

        Cheers. - Frank
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      • Originally Posted by BIG Mike View Post

        No offense, but making a decision based on a data set of one, is a knee jerk reaction, rather than an actual strategy. Chances are that customer would have complained at any price point - it's inevitable in any business.
        No offense to you too but I was just pointing out one instance I've had with discounting my products. I've had other experiences (which wouldn't be appropriate for me to list them here) on why I came to a decision as to why I shouldn't discount my DIGITAL products.

        So my decision wasn't based on a data set of one mind you.
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  • Profile picture of the author Slade556
    Originally Posted by Raydal View Post

    Now I notice that anytime I give a discount to my products the quality
    of the customers decreases. Here I am defining "quality" as the willingness
    to spend more money with me. It also decreases the perceived value of
    your product in the eyes of those who got it at that lower pricing.
    I totally agree!
    But I also think that this depends on the product you're selling. Most people expect discounts, someone here mentioned earlier that people are programmed to expect them and, sadly, that's true.
    Adding more value to a product is a good idea, but again, it depends on the product. Not everyone is willing to see the improvement, most "regular buyers" will still look at the price.
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  • In order for a discount to be effective, it should not be your standard day-by-day practice, but instead an occasional and justified EVENT. It needs to be perceived as a rare and special circumstance, and there always needs to be a solid "why" triggering the event.

    Why does sales season work so well in the retail world? because it's a one-week frenzy, never to be repeated until next year. People know it's not common, and it's temporary, which spurs their purchasing desire.
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    • Profile picture of the author BigFrank
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      Originally Posted by Anonymous Affiliate View Post

      In order for a discount to be effective, it should not be your standard day-by-day practice, but instead an occasional and justified EVENT. It needs to be perceived as a rare and special circumstance, and there always needs to be a solid "why" triggering the event.

      Why does sales season work so well in the retail world? because it's a one-week frenzy, never to be repeated until next year. People know it's not common, and it's temporary, which spurs their purchasing desire.
      You're speaking of offers that consumers are exposed to year round. My interaction with a prospective client is a 'one-off' and is ALWAYS a special event.

      I'm amazed at the lack of understanding of how anything can be good or bad for business, depending on how it is employed.

      I plan to retire in the next few months, debt free after a 50+ year career in sales and marketing. When I'm not sitting on the dock of my lakeside home I'll be exploring new byways in my recently acquired BMW convertible, purchased with the proceeds of 'discounted' contracts.

      You folks go right on believing that by following the dictates of the gurus that you choose to emulate that there is only one way to skin a cat. I think my problem may be that I have not read any books on selling, I really don't care how other people sell, I have never built a list, I just learned how to spell SEO but never employ it, I don't do Facebook, I have never sent a tweet, I was under the impression that 'split-testing' was a trial separation from my girlfriend and have always believed that the secret to success was developing a personal style that works, sticking to it and not letting every new "method' distract you from what is working.

      Go right on believing what you believe. Personally I do not see that as a viable substitute for believing in your own winning way of achieving success, but if it works for you, I would never, ever try to tell you that you are doing something wrong. That would be just plain stupid and extremely arrogant of me. Enjoy. lol

      Cheers. - Frank
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