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Is Discounting A Good Business Strategy?
I had a friend in high school who got dumped a month before prom. When she realized her ex would be going with a new girl, my friend decided to go with anyone she could find. She wound up with some good-looking jerk that she couldn’t stand.
The short version? He got slammed on a pocket flask and puked on her before 9 pm. But she had a date. She took the short-term win.
We’ve all done some version of this. Short-term thinking is the basis for most credit card commercials. But it’s not a great business strategy.
In fact, as business strategy goes, the quick win is something to approach with extreme caution - which brings me to discounting your services.
Discounting - to drive immediate sales - is the business version of grabbing the wrong prom date.
And - look - if you’re starting out and you need a portfolio, fine. But a lot of times people run discounts out of fear. And fear is not a business strategy.
In this blog, I want to advocate for the business strategy of going full-price.
I’m going to give you 9 good reasons to steer clear of discounting. And then we’ll discuss a solid alternative to slashing prices.
1. The Wrong Client
When you use discounting as a business strategy, you’re essentially emphasizing price above everything else. That can really bite you in the butt.
You’re tossing yourself into a sea of online offers with most of your eggs in the basket of price point. Now you’ve created an equation that makes your offer compete on the grounds of math - and nothing else.
All that business strategy does is qualify your leads according to spending.
There’s no connection between your long-term offer and their compatibility with it. Their level of investment - both in terms of commitment and capital - is by definition pretty weak.
You need a strategy that builds momentum toward the business you actually want. But this just surrounds you with random people. They may not value the journey you’re on. They're likely not your ideal clients.
2. Everything’s a Negotiation
Discounting can also give a bit of a garage sale vibe. That can set loose a dangerous dynamic.
Now you have a business strategy that’s opened up the idea of negotiating. And soon…everything’s up for negotiation.
You could spend the rest of your time explaining to discount-motivated clients why you can’t discount them again and again, or more and more.
Unless you want to spend every second fighting for every cent, be wary of the discount as a driver.
3. You’re So Expendable
Most of my clients have service-based businesses - coaches, assistants, consultants, attorneys. Remember, “service-based” is just another way to say “relationship-based.”
If your business strategy leans heavily on discounting, it can set a funky, transactional tone to things. It kind of demotes it from a relationship-based service to a supermarket.
A transactional relationship is essentially an expendable relationship. There’s no expectation of building for the long haul there.
You are super replaceable. It just takes another discount to lead them to the next transaction.
4. Profit Squeezing
Even though some people think discounting is a business strategy that pays in the long run. Thaaaaat’s not really been my experience.
More often, you find yourself at the end of a lot of hard work wondering what it was all for. I mean, there’s no way around it - discounts squeeze profits.
Remember your costs don’t go down when you’re discounting.
All your platforms and subscriptions, your VA, your rent - all the overhead of working and just being alive…it aaaaaall keeps on coming. And it takes a bigger and bigger percentage as your profits get sliced.
5. Tension With Your Full Price Clients
Bringing in one client on a discount and another at full price can create a weird dynamic with your clients - especially if your clients interact.
It’s possible to get some serious blowback from clients who aren’t on the same discount gravy train. They can feel hurt, manipulated, even cheated. And they could ask for retroactive deals.
Aside from squeezing your profit margin, this can make a depressing mess of your relationships. It can create some real toxicity in a cohort that’s supposed to be about trust.
6. Opportunity Cost
So I’m assuming you work off the same 24-hour clock as the rest of us.
And if you’re tying up your limited work slots with discounted, probably one-term clients, this business strategy can exact a pretty big toll on your schedule.
The opportunity cost, in the end, is hard to calculate. But it’s worth asking the question: Who are you not spending your time with while you’re attending to your discount clients?
What ideal client are you passing on to some other provider?
7. Client Retention and Referrals
Discount clients can be a hard lot to retain. Remember, this is a pricetag-based relationship. Once the discount is gone…
If your business strategy relies too much on discounts, your focus (and your spending) are gonna have to shift to incessant client acquisition.
According to Harvard Business Review that can be anywhere from 5 to 25 % more expensive than client retention.
And it might even be harder to get referrals from discount-based clients. Are they willing to refer your service at full price?
8. Brand Identity
There’s a marketplace out there, and your discount can send the wrong message.
Basically, low prices can create a budget brand identity. That usually screams “poor quality.”
Proctor & Gamble did a test in the 90’s that showed beauty products priced too low created a drugstore vibe. If the client was a prestige shopper, the price that was “credibly expensive” was way more attractive.
And we all know this, on an instinctive level - don’t we?
You see a product or a service provider, then you see the low price and think, “how good can this be, really? At that price?”
9. Your Self-Esteem
Most of all I want to bring up the impact this business strategy has on you. On the way you see yourself. On how you value your work.
I work with so many great practitioners who’ve been taught to undervalue their performance. Does this sound like you? Yeah. I’ve been there too.
Discounting is a kind of self-talk. And it speaks directly to the part of your brain that I call The Saboteur. This is the part of your brain that says “you don’t belong in the winner's circle.”
And that’s crap. Don’t feed that identity…ever.
Yes, we all have to earn our place, but undervaluing your work is not how you do it. Sending a bargain-basement signal to your own identity is the shortest of all short-term thinking.
If your business strategy is coming from a scarcity mindset, it doesn’t matter what the financial benefits could be in the short run. It’s just not worth it. Don’t. Do. It.
Make Value Your Business Strategy
So, okay, fine…no discounts. What can you offer people?
Offer them value.
Create a market image that emphasizes the value of your work. For what they pay you, make the ROI a no-brainer. Use testimonials and case studies to help them see that your impact makes your "full price" an amaaaaazing deal. And then deliver.
A business strategy that revolves around worth, not around discounts, attracts the right clients for the right reasons. They’ll see the opportunity in your offer.
It won’t be a discount. But it will be a bargain.
“It’ll Do” Ain’t a Business Strategy
So before you go ahead with the discount, ask yourself - what’s this business strategy for? Where’s it coming from?
Don’t allow fear or impatience to pull the trigger on a decision that you could later regret. Because you can’t short-term your way to happiness. It’s just not how success works.
There’s a reason why good stories end with Happily Ever After and not That’ll Do For Now. I mean, you could grab any old date for this dance - but it’ll likely just end in one hell of a mess.
Did you set your specific goals? Do these goals involve taking your passion and creating a profitable business out of it? I could be the mentor for you.
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