The Discount Trap
Raise your hand if you build discounts into your pricing.
While this is a popular practice, in honor of this Black Friday and Small Business Saturday tomorrow, I’d like to give you a few words of caution.
Discounts have been a powerful marketing tool since commerce has existed. However, relying heavily on discounts for your value proposition can be dangerous for two reasons. First, you lose the opportunity to be specific and scarce. And second, you lose control. Let’s break these down further.
Specificity and scarcity
Mr. Johnson, my ninth grade English teacher transformed my writing and possibly shaped my career by forbidding us from using the words “a lot” and “thing” in our writing (thank you, Mr. Johnson!). Imagine how vivid your writing becomes if you can’t call an object a “thing” and instead of saying “a lot” you have to describe feelings and frequency in more detail.
How does this relate to discounts? Simple. A discount is a generic strategy for adding value, just like “a lot” and “thing” lead to a very generic writing sample.
What if instead of offering a discount, you had to describe all the other aspects of your value proposition to lure in your ideal customers? Rather than having the best price in town, what if you were the only clothing boutique in town whose owner could simply look at a picture of you and recommend the exact size and style jeans you should buy (this actually happened to me during the pandemic and I’ve never loved a pair of jeans so much in my life).
When you are forced to use specificity in your value proposition by moving beyond the discount, you create scarcity as a result… and scarcity is an amazing marketing tool. When you show the ways you are unique/scarce, people line up for you. For example, we all know that restaurant that has a line around the block because they have the best (fill in the blank here). Hint for filling in the blank… it’s always something like “croissants” or “wood fired pizza” but never simply “price.”
In business, we would never risk losing control of something like our bookkeeping, but we risk losing control of our marketing all the time when we use tactics like discounts to establish scarcity and desire. If your biggest marketing tool is your pricing, you are always at the mercy of a competitor who can offer the same or product or a similar one for cheaper.
Now… don’t get me wrong… I’m not saying to never use discounts as a tool in your business. Instead, think through why you are using discounts and what you can do beyond the discount to establish scarcity. In addition to the discount, what is your value proposition, or in other words, what is the secret sauce that keeps your ideal customers coming to you and only you for whatever you sell?
In honor of this holiday season, I challenge you not to fall into the discount trap and instead to commit to never using a discount isolation as a marketing strategy again. Stay in control of your marketing and always dig deeper.