285: Giving Discounts To Your Customers
In today’s episode of The Startup Chat, Steli and Hiten talk about discount pricing strategy. They discuss the pros and cons of offering discounts as a start-up and they also discuss how to refuse discounts requests from customers.
A discount pricing strategy is a key part of your product marketing because it has the ability to greatly impact the amount of sales and profit that you make. Choosing the right pricing strategy for your business will not only help to sell your products but also improve your brands appearance in the marketplace.
While a discount pricing strategy may be useful for driving sales in the short term, this approach when used long-term could have some unexpected effects on your brand image and the perceived value of your products.
Tune into this week’s episode of The Startup Chat to hear the exclusive discussion on discount pricing and why, how and if a startup should offer discounts to their customers, as well as Steli and Hiten’s advice on how you should leverage discounts to get the maximum return.
Time Stamped Show Notes:
00:40 Talking specifically about discounts; the why, when, how and If
01:10 Comparing the B2B and enterprise world pricing strategies
03:23 Discounting and branding overview
04:48 eCommerce discounting pricing strategies
05:20 Word of mouth and blanket discounting
06:05 Standardizing discounts on all offers and discount matching
10:06 Selling the value of the product and the brand
12:39 How to give discounts the right way
15:56 How to refuse discount requests from customers
16:02 Refusing discounts case study
3 Key Points:
You must really understand the impression you are putting out into the market
If you give a discount to 1 person the next person that comes along will expect the same discount.
When you give a discount always get something in return
Steli Efti: Hey, everybody. This is Steli Efti.
Hiten Shah: And this is Hiten Shah.
Steli Efti: Today on the startup chat. We're going to talk about giving discounts to customers, why you shouldn't do it, when you should do it, and how you should do it. So this is something ... It's crazy. We've now recorded way more than 250 episodes, but we've never talked about discounts. We talked about it a little bit here and there, mainly on the episode on negotiations. But we never talked about specifically why, how, and if startups should discount their retail pricing to customers. So I'll start making a claim, and then I'm dying to hear your thoughts on this. So especially in B to B. I'm not that familiar in B to C to be honest, like that's just not my world. But in B to B I am not the greatest of fans when it comes to discounts. I know that it's, in B to B, kind of best practice to do that. A lot of companies are heavily discounting through their sales teams when they talk to prospects and they're trying to close a deal. Sometimes they do it because they want to be competitive with another offer that a prospect has. Sometimes they do it just because the sales team thinks that if they can lower the price, it's going to make it an easier purchasing decision. And all in all, I think it's a really bad practice that leads to a lot of issues down the line. So I'm really against aggressively discounting in B to B, if you're selling to small and medium sized customers. In the enterprise world, it's a totally different ballgame. In the enterprise world, I think you have to add a massive margin, so down the line, once you talk to procurement, you can give the big discount because it's just the way that larger organizations purchase things. There's a whole department, the entire job they have is to save the company money when they purchase from vendors. So if you price your product without that in mind,