Setting Profitable Prices: A Step-by-Step Guide to Pricing Strategy--Without Hiring a Consultant, + Website

Chapter 16

Pricing with Discounts

In-a-Rush Tip

You can skip this chapter if you are not currently dealing with discounts.

You also can skip it if you need to set a price today. But . . . discounts can have a big effect on the best price—a big positive or negative effect.

Discounts: A Double-Edged Sword

Psychologically, we all love discounts—poor and wealthy alike. We like to think we’re getting a deal. That we’re lucky. Or that we’re a smart shopper.

Discounts almost always increase unit sales. The “almost” reflects big questions about when you have a premium-quality product or when consumers have little method other than price by which to judge your quality—and quality is extremely important to them.

So should you offer them? It depends. Remember when I said what people hate about marketers is our answer to everything is to test it? Well, that’s the correct answer here.

If you don’t test the effect of discounts, you may be throwing away a lot of money. You’ll see in some of the research that follows that:

• Discounts can worry consumers enough that they’ll reject your product/service.
• You may get no more sales from a 40 percent discount than a 30 percent discount. Or you may get no more sales from a 30 percent discount than a 20 percent discount. (Or you might!)
• The discounts your consumers will respond to most will be different depending on:
  • Your industry
  • Your competitors ...