I wanted to share why I’m not a fan of Black Friday and this led me to writing about when you should and shouldn’t discount. This blog post is actually based on a video I shared in a local Facebook group for small businesses that started some interesting conversations. It was also prompted by some excellent marketing I saw from my ‘veg box’ provider which when I shared it on LinkedIn that had only positive feedback… despite them offering a “0%” discount.
With Black Friday I know a lot of business owners feel the pressure to discount and it can feel unavoidable to take a reduction in price. However, I think that there’s a lot to unpack before you decide to discount.
Taking the emotion out
Firstly, I have certainly I found for both my own business and for a lot of clients and others in my network it’s an area which causes quite a lot of heartache not just from a hard-nosed business point of view. There’s actually also quite a lot of emotion around discounting.
This post therefore tries to take some of the emotion out, by thinking about the good reasons to discount and when you could consider offering a discount. However, I’ll also touch on some of the things that I don’t think really work with discounting, and I’ll look at how you decide how much you should discount if you’re going to do a discount.
I am assuming you, like me, value fairness and transparency so you don’t have a ‘list price’ that you never really charge to anyone. The discounts I am discussing are based on assuming that your standard price is one you consider to be fair, in most circumstances, both to you and your clients.
I know that sometimes when you are starting up worked out your ‘fair’ pricing is tricky. Hopefully by thinking about discounting it will help you consider that. However, you might want to come back to your discounting policy again once you’re more confident around your pricing.
Reasons to discount – and how to do it
The reason you are offering a discount affects the way you do it and indeed the amount. So when should you discount?
- The first thing that may be obvious to you is that many businesses have some kind of discounted offer for a product or service that acts as a gateway into your product, your service or your ‘world’ as a business. I think that works, if you want to do something that’s very entry level, maybe not too expensive for you to produce, and genuinely generates new fans. This works particularly where people need to ‘get to know’ your offering.
- A second reason – and we do this ourselves at Holy Brook – is you might choose a particular group of clients or type of client, you want to offer a discount to. For example, I offer a 20% discount for registered charities, or community groups on our standard pricing. This means while it’s not as profitable for us to work with charities, it helps us reach a market we really love supporting, and it’s a really important part of my business for non financial reasons. That’s a conscious choice we’ve made. It means that when a charity comes to me, asking for help, I can answer in a positive way. This also avoids feeling either mean or inconsistent.
- A reason that many businesses had for discounts earlier in the year was to fill a hole in your business. It may be because of a general downturn, loss of a major client or maybe because you are starting up. This is where I think it can get a little bit dangerous, because the temptation is to discount to fill a hole. I would think about doing this as a time limited thing. I’ve seen situations – particularly for service based businesses – where some clients have a long standing discount, just because they bought when a business needed that revenue gap filling. Ironically, that can mean a discount can continue when you’re having to turn away or struggling to serve other clients who would pay more. So it’s worth thinking about the clarity of your messaging on that.
When shouldn’t you discount?
It should be obvious from the above that I don’t think doing a discount because everybody else is is a good reason to discount. That’s why I’m not a big fan of Black Friday or Cyber Monday or any similar discount events. If it works for you, and it’s going to make you a profit and you feel confident that this is going to work for you then go for it. It clearly works for the big retailers, they do find it helps them shift a lot of stock, and that’s great for them.
However, I certainly don’t think you have to do a Black Friday offer. In fact, I’ve seen some businesses, and not just tiny businesses by any means, actually make a real play of this. They promote that that they’re NOT doing Black Friday discounts. The company I bought my favourite handbag from, Elvis and Kresse, have as a big part of their marketing that they never do sales.
Similarly, the people, I buy my veggie box from, Riverford , recently did a really interesting marketing image – showing an offer of NO discount on your vegetables. In both cases it was part of their messaging around why they’re a good value, fair price all year round. So don’t think you have to do a discount, just because everyone else is:
Another reason to avoid doing a discount, is because you’re worried you have got your pricing wrong. If your pricing is wrong, have a look at it and get it right. Work it through with your accountant if they offer this sort of service, or discuss the price point with someone who knows your product and your industry. You should have confidence in your pricing.
The final reason I would never offer a discount is simply because someone asked me. I like to be very generous and positive but not everybody is your customer. If you’ve thought your price point through and you’re really confident it’s fair, it doesn’t mean everybody in the world has to be able to want to buy at that price. I love Elvis and Kresse handbags, and I treated myself to one a couple of years ago, but I haven’t bought one of their rugs. This is not because I don’t like them – it is because although their pricing is fair it’s not currently something I’m going to invest in at that price. As it happens in recent years, I have never given a discount just because someone’s asked me.
How much to discount?
I’m often asked how much to discount. The annoying answer is that it really depends what you’re trying to achieve. I’m actually currently putting together a course that will effectively be 100% discounted, because it’s going to be completely free.
I have two reasons for that is it will educate people about what it’s like to do an online course with me, and hopefully, they will get to like it. I am completely up front about that in explaining the course. Secondly, I’m choosing to do that as part of my pro bono work, because it’s aimed at the charity sector.
However if your discount is actually about selling a product that will make some money, obviously, you’ve got to cover your costs. If you’re reading this and you know me face to face you’ll know I this is a pet topic for me, but that’s got to include the time of the staff or business owner.
If you are still struggling with what is your time worth as the business founder again, see if your accountant offers a “power hour” or similar service to help you with this. I also always remember a conversation that I had with an associate, when we were pricing a quote a couple of years ago. We were struggling with pricing as we knew we were likely to be undercut by another provider. We just decided, to consider what the price we would charge where we wouldn’t be annoyed if the client said yes. It was simple and quick. As it happens we were undercut and we didn’t get the business, but we actually felt good about that outcome.
Why I’m not a fan of Black Friday
All of the above is why I’m such a non-fan of Black Friday and Cyber Monday. Too often business owners can end up charging such a low price, that they can actually feel annoyed or resentful.
I’d also consider the impact that discounting has on your other clients – discounting needs to be consistent and feel in line with your values. At Holy Brook one of our key values is fairness. When pricing up I always ask myself whether a price would be perceived to be unfair by another client.
Just over a year ago I actually stopped working with a client because of this. They required a discount that meant they were paying substantially less than a similar client who was willing to pay my fair value price. It was a tricky decision but I felt that my pricing had to be fair to both my team and all of my clients. I have never regretted the decision.
Obviously, as I said at the beginning of this post, all of this does rely on the idea that you’ve already decided what your fair price is for a given level of service or given product.
I would be really interested to know if you are doing Black Friday offers, or indeed, if you’re not.
If you’re discounting for Black Friday know why you are, and how much you are willing to do so.
If you aren’t good for you and I would consider promoting why you’re not.
Where to get more help
If you want to keep up to date with the tips and techniques I share please do sign up to my free newsletter, and if you want to let me know what you think or book in a Power hour to look at your approach to discounting please just get in touch.