Be Careful of the Discounts You Offer
I have a friend who only buys Whoppers from Burger King when they have a dollar deal going on. Know why? It should be obvious, but here’s his answer;
If they can make money on me at $1, they are gouging me at $4.
Tough to argue with that logic, but there is an even better example.
I am a self-confessed Wal-Mart lover. I love Wal-Mart because they have EVERYTHING. Forget all the politics about sourcing and minimum wage and everything else, from a shopping experience for most mundane, everyday items, Wal-Mart is my store of choice.
While in my local store just after the school year let out in late June, I saw an end cap display for portable pools selling for…wait for it, $800!
I took note of the display because I thought it was a funny item to use as an end cap for a couple of reasons; for one, it was friggin’ huge. Secondly, because it was $800!
Fast forward to a week ago
While cruising through the same store for what was undoubtedly another deodorant or shampoo run, I saw the same end cap display with the same pools, except now they were on sale for $400! That’s almost a 50% discount (the actual price of the pool as you can see, was $824.)
Seeing that much of a discount immediately reminded of my Whopper friend and left a bad taste in my mouth.
In another life, I was directly responsible for selling into Wal-Mart, so I know the hoops and the life-sucking beatings their buyers put companies through, but seeing this much of a markup on a product that expensive really left a bad taste in my mouth.
Not a, ‘I’m going to go find another store’ kind of taste, but enough of one to get me to think a bit more about purchase cycles and timing. Sure you expect to see discounting late in the season, but this was one I think was excessive. I wonder if anyone else saw these pools that clearly didn’t move over the summer?
How this impacts you?
Discounting in construction is a slippery slope. Not because you have end-of-year product to sell (some of you might), but because you don’t want to discount too much, because you then look like you were over-charging in the first place.
Be careful what you put in your ads
During my consults, I review past ads and on-going campaigns, and one of the things I look for is the amount of discount offered in promotional material. Things like “$500 off a new bath” or “$1,000 off countertops”are commonplace, especially in print advertising. As I mentioned above, if you offer too much of a discount, people don’t trust you.
But there’s a better way!
Instead of offering money off (if you do offer discounts, it should always be in dollars, not percentages off) give them something with a high perceived value.
For example, if you are promoting bathrooms, instead of offering $500 off, you could say something like “free shower door” or “upgraded tile” if you act now.
Another example for a kitchen ad could be “free stainless steel double sink” or “upgraded appliances.”
You may think you are doing your prospects a solid by digging deep into your own pocket, but it could be actually costing you business!