Will Discounts Destroy Your Business? Part 2

Yesterday I described how I used to be in the “discounts will destroy your business” camp.

I hated discounts—firmly believed they'd cheapen your “brand” and train customers to NEVER buy and forcing you to run constant fire sales.

I've come around on this.

At Simple Programmer, we make heavy use of discounts in our sales funnels.

In fact, most subscribers will see some kind of discount offer within the first 10-14 days that they're on the list.

Chances are good that they'll encounter at least one other discount within the next 4 weeks or so.

And on top of that, I also have a separate series of automated discounts that go out every 90 days or so after they sign up.

Still the question remains:

Have all these discounts trained our subscribers to only buy during a sale?

To answer that I looked sales data for three different products stretching back 10 months or so (all the data I have available, since we switched shopping carts last summer).

And I found that on average, 48% of our sales for our two best selling products come at full price.

That number is a bit skewed too.

Many of the discount sales come from our upper-end product, which is priced at $299.

For our $99 mid-tier product, 59.6% of sales come at full price.

In our case, discounts are hardly “destroying” our business.

Instead they're increasing revenue to the tune of 30-50%.

Here are some principles I follow to use discounts effectively:

1. Offer your product at full price first.

Ideally I want the prospect to at least consider buying at full price.

By pegging the value of your product higher initially, you'll make a discount that much more compelling later on.

2. Use the discount to “save the sale.”

There will always be a group of prospects who think your price is just a little too high, or who will just sit on the fence forever unless you give them a reason to buy now.

Discounts can help you turn these “lost” prospects into customers.

3. Make sure your discounts are LIMITED—either in time or quantity.

I've seen a surprising number of businesses that send out a weekly newsletter with a discount code in the footer week after week.

This approach is TOXIC—here you actually are devaluing your product by turning the “sale” price into the normal price.

4. Keep your discounts UNPREDICTABLE.

It's fine to run a Black Friday/Cyber Monday sale every year.

But if your customers know that you run a special promotion at the end of every month (or whatever the pattern is) they're more likely to hold off until the next sale rolls 'round.

And I'd also recommend rotating your offers—don't just roll out a “20% off everything in the store” discount on a predictable schedule.

Offer $100 of one specific product, or a buy-this-get-that deal.

By mixing it up like this, you'll avoid the “everything's always on sale” problem—and get the revenue-boosting benefits of discounts without the brand-sapping downsides.