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Sarah Petty

3 Ways Having a Sale Scars Your Small Business

Jan 28 2013, 06:01 AM by

 

When business is slow, nothing is more tempting than to announce 40% off to the world and hope you’re flooded with clients to help generate cash flow. And I understand why offering a discount seems like a good thing.

In my photography studio, I compete with not just CHEAP competitors, but FREE alternatives. Everyone has a camera and thinks they are a professional photographer, so why should they pay me for fine art photography of their kids? What I have learned is that a sale can get a huge response for your business. But then what happens to your business?

Here are 3 ways having a sale scars your business for a long time:
1) You Create a Business You Don’t Love
When you discount, you need volume to make up for the discounts. And if you’re trying to be boutique and servicing fewer clients at a higher service level (the business model most creative businesses should follow), you might not be able to handle that volume and still provide the quality of product and level of service your clients LOVE you for. Suddenly you’re overwhelmed servicing clients who don’t truly love what you do, who are choosing your business because you are the best deal they could find.

While everyone loves a sale, certain people shop specifically for the lowest price. They are less loyal. They don’t care about the quality of what they are buying because nothing is more important to them than the price. You can’t build the business you want with these clients. That’s why it’s important as a boutique business owner to ask yourself, “Who is my ideal client?” And then don’t use discounts to attract them.
2) Your Good Customers Expect More Discounts from You
Customers become addicted to sales and only pay attention to you when you’re offering a discount. As a boutique business, you don’t want your customers getting hooked on discounts. You want them hooked on you and the value you add to your products and services. When you discount, you teach your best, most loyal customers to wait until you have a sale, therefore losing your most profitable business.
3) Your Destroy the Brand You’ve Invested in Building
A sale can look like a great plan at first glance. You’re thinking about bringing in new clients, creating revenue and raising awareness for your brand. But it’s important to understand that by discounting your prices, a sale also changes your brand. The perception of your company in your customers’ minds will be different after the sale than it was before. Now that full price item is always worth less in their eyes. Sales can also change a client’s perception of the value of products already purchased from you. Suddenly that $1,000 item they purchased at full price has a value of $750 now that you offered a 25% discount to their neighbor down the street.

While there are times when small businesses may need to discount – when you have fleeting inventory (hotel rooms, hair cuts or services) or need to close out merchandise to make room for new inventory - a good rule of thumb on discounting is to never discount something today that you’ll charge full price for tomorrow.

To learn more about the boutique business model and how to charge what you’re worth, you can download a free chapter of my New York Times Best Seller, Worth Every Penny here: http://www.wortheverypennybook.com/try-a-chapter/.

Read the rest of this Benchmark Blog series on our Marketing in Focus page.


 

Posted in Tips & Resources, Benchmark Series, Marketing in Focus

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