Dealing with discounts

Discounts work well when enticing consumers to try your product or to gain

repeat business from consumers who have already purchased your product

in the past but haven’t returned in a while. They’re also great when you’re

looking for quick ways to achieve sales targets or short-term market gain.

 Be careful not to overuse discounts, because overuse can diminish perceived

value over time with consumers.

Say that you’re a business owner who’s running on a thin margin. You just

don’t have a lot of profit margin to spare. How can you afford to offer dis-

counts to your consumers? Here are a few strategies that won’t make you dig

too deep in your profit pocket:

 ✓ Prompt pay discount strategy: Offer cash discounts for customers who

pay promptly. This strategy helps you maintain a steady cash flow and

reduce what you may end up spending in collection costs.

 ✓ Quantity discount strategy: Offer a discount for customers who order a

large number of products at a time. Typically the cost-per-unit declines

as the quantity increases.

 ✓ ’Tis the season strategy: Offer seasonal discounts to customers who

purchase items in the slow season, such as a lawn mower when it’s

snowing. This type of discount helps you balance your cash flow and

meet your production demands.

Evaluate the previous strategies and decide which ones work best for you.

Keep in mind that value is important to consumers. So no matter what dis-

count strategy you choose, you must ensure that consumers see value in

your offer.