5 Ways Discounts Could Be Hurting Your Brand

There’s no denying the fact that reducing your prices on products in what is known as a discount, offer or promotion is a great way to get potential customers looking at your business, browsing your products, and ultimately making sales.

Discounts are a tried and tested formula that produces results and help your business grow. However, could the promotions and discounts you’re running be causing your business more harm than good, and potentially even damaging your business?

Today, we’re going to explore five of the biggest and most important reasons why discounts could be ruining your business, giving you everything you need to know in order to avoid making these mistakes and make the best decisions for your company.

1.  Negatively Impactful on Your Quality

The first and the most important thing you’re going to want to think about is the quality of your business while you’re running a discount. Most notably, you’ll want to think about the quality of the product or service you’re offering.

Let’s say you’re running a discount for first-time customers and you come and install say, an oven, into their home. If you’re the producer of the oven, are you able to manufacture them quick enough to keep up with new demand? Will you be able to manufacture them quick enough to maintain the high-quality expected of each unit?

This, of course, covers all types of products that you could produce. Even if you’re buying the products in, are you able to maintain a consistent income stream of products since you won’t want to run out halfway through?

why discounts can hurt your business

Going back to the oven example, if the ovens are being installed into people’s homes, are you able to maintain a quality installation service since your engineers will need to cover more homes and complete more installations all while retaining a high level of quality control and quality customer service.

Both the experience you provide your customers, and the way your business operates is going to be affected by running a discount, and it’s vital to make sure that you’re paying attention to the details to ensure everything runs smoothly.

If things start going wrong, your business is going to develop a negative light in the eyes of the customers, and a bad reputation is never going to help you succeed now or in the future.

2. Stockpiling Complications

One of the most common results that customers do once something goes on offer is stockpiling. This, of course, means that because something has a discount, they’ll buy more of it to keep them going for as much time as they can afford.

Not only can this cause a decrease in your stock levels that can stop other customers from enjoying the discount, when the product comes off of its discounted price, nobody is going to need to buy the product for the higher price because they’ll have loads at home.

“There are some ways around this, depending on the nature of the service or product you’re offering, such as only allowing one customer to have a certain number of items, but this will depend on you and your plan of execution,” shares Sam Harris, a data analyst for WriteMYX and Brit Student.

3.  Creating Future Expectations

Down to the fact that your business is running discounts and promotions now, this can, in some cases, create an expectation that you’re going to be running similar discounts and promotions in the future. This means people find your business and expect your prices to be the discounted prices they first discovered you offering.

When your prices were low, your customers were happy, but now they’ve gone back up, they’re not happy, and many will try their luck to see if they can get the reduced price while threatening to take their business elsewhere.

You’ll want to be careful when it comes to offering discounts and what products you’re offering them on; especially if it’s a product that people buy consistently. Sometimes it works, and sometimes there’s a reason, but may sure you bear this in mind because you will get customers trying their luck.

why discounts hurt your business

4. Creating Price Wars with Other Companies

It doesn’t matter whether you’re running a shop in your local area, or running an online e-commerce store, slashing your prices with a store offer in the form of discounts or coupons may seem like a great idea to grab the attention of customers, but other businesses are going to notice, and this could create a price war.

A price war is where two or more businesses go head to head trying to keep their prices as long as possible in order to retain as many customers as possible. However, the winner of these price wars is typically the business who has more capital to invest because they can go for longer.

“If a business holds onto a losing price war for too long, this can cause a lot of financial damage, and can even render a business bankrupt if they’re unwilling to give up. This is especially important that you avoid this confrontation if you’re a startup business that’s just getting up off the ground,” explains Sarah Maplin, a sales specialist for Australia 2 Write and 1Day2Write.

5.  Harder to Profit

While it’s easy to see that discounting products and services in your business can be a great way to market yourself and grab the attention of customers who may previously have not known you existed, it does, of course, mean you’re not going to be making as much money.

The more discount something has, the lower your margin and the less money you’ll be making. Of course, if you’ve got an influx of a certain product that you’re discounting and you’re able to still turn a strong profit on it, that’s great, and this won’t be so much of a product.

The problem comes to say with an introductory product where you might not have a lot, and you’re relying on future sales to cover the lost costs from the discounted period. If this doesn’t happen, your business can lose profits, and you may end up struggling.