It would be nice to have a simple answer for this question, but the answer is in the way you market your products or services and the manner in which you price them.
Here are a couple of examples why you should or shouldn’t discount your prices:
1) If you provide a service with a marketing approach which states “you provide the best service, at the best price” then you have already answered your question. You cannot lower your price. To do so would be going back on the claim you have made in your advertising; best service at the best price and because of this, the price you provided up front was not the “best price” and your company will lose credibility with your prospects.
Stand firm on your pricing if you have provided your prospects with reasons, other than price, to buy. Tell your prospects how you provide the best service BEFORE you start talking price; otherwise you’ll have to support your price by chasing them with your “good service” presentation. Once this has happened, they may become so fixated on the dollars that you won’t be able to sell them without lowering your price first. Many pricing challenges are created by the “cause and effect” circumstances described above.
Now, if you’re marketing approach states you have the “lowest prices in town” you’ll have to read example 2.
2) Many people are in industries where prospects expect the price to be a variable in the transaction. Businesses such as landscaping, house cleaning, window cleaning, car sales, recreational vehicles, and furniture or computer services typically use price as a sales tool.
If you are in a business where people often negotiate pricing, you not only have prepare yourself to handle pricing objections, but right away you must plant a seed earlier on in your prospect’s mind that discounting prices further is not an option. This can be accomplished both verbal and through the use of marketing.
By using phrases such as “competitive pricing” or “truckload sale” and even “exceptional spring/summer/fall pricing” in alliance with your marketing strategies, these special phrases are communicating to your customers that prices have been discounted and those discounts will be reflected in the pricing provided.
3) Prospects will ask you for a price reduction and if it is customary in your industry to provide one, you need to have a good reason behind your actions. For example: “We don’t normally reduce our prices, but if you think you may have a friend or business associate interested in our product/service, we are willing to provide you with a referral discount for referring those people to our company. Do you think you may know someone who would also be interested in our product/service? “ Essentially you are providing the referral discount now in anticipation of the referral they will send you down the road. Keeping in mind the referral may or may not come but getting a commitment from your prospect to send you one for the discount sure helps!
4) You may want to consider a discount when customers buy more than one product or service from you. If you make multiple purchase discounts a part of your marketing or pricing practice, make sure you have enough margin in at least one of the products or services you are discounting to still make a profit! Click on this link to see an example of a pricing practice that allows discounts for buying multiple products or services Multi item discount pricing example.
We don’t believe you should discount your prices unless you have a good business reason for doing so and that you can explain that business reason to your prospective customer. Remember, you’re in business to make a profit!
© 2009 eMarketing 4 Business LLC