Discounts – Good or Bad?

Gloria Murray from Murray Associates Accountants looks at discounts – are they good or bad for business?
Discounts can be a great tool to use when marketing your business, but used in the wrong way they can be really BAD! I’ve seen clients, who are already really busy, using discount websites to drive new customers into their business. Let me give you an example – in a beauty business this salon was already busy and the site they were using didn’t have access to their diary. This meant they would get double booked at times and had no control over when the appointments were generated.
This was bad for business, first off how do you serve your existing clients who are paying full price when you are double booked? Also, the new clients who have booked at a discount are not seeing the best of the salon, as they have to wait to be seen by the beautician – so they’re unlikely to come back.
The salon put itself under a huge amount of pressure when they didn’t need to. After we spoke about this, they stopped giving discounts (unless they ran the numbers and thought about it) and they also put their prices up. They’ve had their best four months ever!
Discounts should only be used for a specific reason and only after looking at the numbers and the results this will have on your profit, something not many business owners feel comfortable doing.
If you want to use discounts in a way that benefits your business, here are five tips for you:

  1. If you have spare capacity in your business then discounting can work really well to build your business. Be specific about when the discounting applies (and for a short period) and perhaps encourage existing customers to bring a friend (give them the same discount, eg bring a friend and you each get a 50% discount). I have a client who offers specialised exercise classes and this worked really well for her.
  1. Find out the specific times when you’re quiet then offer a discount for these periods – that can work really well. It might encourage some existing clients to come at that time, leaving space free at the times when you’re really busy. A win-win scenario all round. I have a client who used this to offer servicing at times of the year when they’re normally quiet. It has led to him being busy at quieter times and he’s still fully booked at his busy periods.
  1. Use a gateway service and offer it at a really cheap price. For example if your business is a hair salon or beauticians offer a blow dry or mini-facial (at times you’re not busy). They’re non-committal services (the client thinks little can go wrong with the service that will last longer than a couple of hours). It’s a way for a potential client to try you out before going for a more expensive treatment. This can work well in other industries, so it’s not just specific to hair and beauty.
  1. You don’t always have to use price discounts, it could be treatments or extra services bundled in as a special.  Think ahead and get those special dates in the diary, Valentine’s day has just past, but Mother’s Day is early March and then there’s Easter. You could run mini-campaigns around all those dates. For example around Mother’s Day you could offer a gift package that someone could buy for their mother (that reminds me – must text my son with subtle hints!!).
  1. Student discounts work really well too (offered only at certain times when you’re normally quiet). If you encourage them to come to you while they’re a student they will stay with you for a long time. I have a client who has a hair salon and he has clients who started coming as students, they still come and so do their grown up children!

Don’t fall into the trap of discounting just for the sake of it. At a recent event I ran on pricing I met a salon owner who was really busy but was continually discounting. The problem was in her head and not the clients. She was finding it difficult to make enough profit, even though she was fully booked.
If you have any questions or comments, please email Gloria at info@murrayassoc.co.uk