Article

The Dangers of Discounting for Service-Based Business Owners

As consumers, we are conditioned to looks for deals, and when a sale happens, we jump on it. By creating scarcity – a way of limiting the availability of an item that’s for sale – business owners can more easily encourage buyers to make a purchase before a discount disappears, or a deadline passes.

This strategy works really well if you sell physical products. But if you sell services – whether it’s coaching, web design, photography or copywriting – discounting can be deadly, and here’s why.

1. People Start to Expect Them

Let’s say you run a direct mail or email campaign offering a 25 percent discount on your photography sessions if people book before a certain date. Even after that date has passed, there’s a good chance that someone who missed the deadline is going to call you and ask for the discount anyway. Because if you were willing to offer it then…why not now?

Most buyers don’t understand that your sale was meant to fill your schedule during a slow season, or boost purchases of a new service package. They won’t know the strategy behind your sale. So they’ll expect you to offer them a deal, simply because you had done so in the past.

Although you can handle these requests gracefully, you shouldn’t have to handle them at all if youcan avoid discounting your services.

2. You Devalue Your Expertise

If you were willing to work for lower prices before, why not now? Running discounted offers conditions people to ask for a lower price, while at the same time diminishing their perception of the value of your work. Instead of seeing your sale price as a great deal, they’ll see your regular price as too expensive.

It’s also more difficult to create a sense of urgency when you sell services. In many cases, the services people buy aren’t urgent – so, if you become known for offering discounts from time to time, buyers simply wait until you have a sale before they make a purchase.

But for the same reason, not everyone will take advantage of your sale when you run it. If they aren’t in a rush to use your service, the sale isn’t enough incentive for them to take action. Double whammy. You make fewer sales, at a lower price

3. It’s Harder to Raise Prices Later

If you regularly offer sales to your audience and then raise your regular rates, you risk creating too big of a gap between your sale price and your regular price. Buyers will have a hard time understanding why they should pay your new rates, when your sale price is substantially lower.

Also, by running a sale, you do something called “price anchoring”, which means presenting a framework for buyers to compare prices. If they see a competitor offering a regular rate that’s comparable to your sale, they’ll choose your competitor – assuming you haven’t shown them the overwhelming benefits of working with you over the guy down the street.

What to Try Instead

Instead of offering a discount, you can offer extra value for a limited time – maybe a free e-book, registration in a course or a bonus from a complementary service provider. Be creative, but make sure you’re adding significant value at a minimal cost to your own business.  This type of incentive is much more likely to bring in the kinds of customers you want to work with, and helps you build a more profitable business, too.

Learn More

Want to know more? Take advantage of Small Business BC’s wide selection of seminars for entrepreneurs and small to medium-sized business owners. Space is limited, so don’t miss your chance to register today.

Plus, don’t forget that you can meet one-on-one with an expert to get specific information that applies to your business by booking an appointment with Small Business BC’s Ask the Expert service now.