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Why discounting can be hazardous for running your business

Your company’s reputation depends on the business values that you incorporate while engaging with the customers. Discounting can be proved harmful for your business if it goes unchecked. Discounting may damage the value of your brand even if you are offering unique products or services.

It may sound cool to offer discounts to customers for a sudden hike in sales but it creates long-term damage to your brand value. It is a common myth that the greater the turnover higher will be the profits. Entrepreneurs should not believe in such wrong beliefs. Such hit and trial methods have always dearly cost the owners. Such moves can initiate a greater price war among your competitors and you may damage your business without making any profits. Consult financial experts or outsourcing services before you consider to reduce the prices of your products.  Here we present some reasons why offering discounts cannot be an option to increase profits:

Discounting is aimed at short time benefits:

Discounting without proper planning will do more harm to your company than good. This will create a sales spike for a short time but in the long-term, it may damage the brand reputation. Most business owners do not recommend slash prices which will create a sudden onslaught on sales. According to financial experts, even a slight price discount may decrease the operating profits to a greater extent. Several surveys in recent years have shown that when an average company slashes its prices to increase volumes and raise profits, it has generally ended with a failure. No entrepreneur should ignore these facts and statistics while planning for a business. 

Discounting sets dangerous expectations among the customers:

Customers will get used to the regular discounts available for your products and once such expectations are created, it devalues your brand. When sales representatives offer price cuts to increase their commissions, customers start to expect such regular discounts. After that, it becomes difficult to make profits from the exclusive products that your company has launched.

Business dealings become more complicated through Discounting

A business deal becomes irrational when you can offer discounts to one customer but not for the other one. This indicates that you are selling the same quality of service or products under different price structures. Such variable pricings will hurt the customer experience of your company. This can lead to internal confusion and your management team will face a lot of difficulties controlling the chaos. If your business has a larger customer base, then such complications will become nightmares for you.

Discounting shows the lack of faith you have in your business

When you start to discount your products, it is basically due to the lack of confidence in your services. The owners start to discount when the customers do not value your products as you have expected.

Profit margin gets squeezed:

It is obvious if you sell products and services at their original price rather than on a discounted price, your margin will be much higher. As a result, you need to cover those profit margins that you are losing due to discounting through future opportunities. This requires creating more sales efforts and make deals at higher prices.

Conclusion

Customers always expect to grab the best deals possible in the market. But discounting may create a lot of problems for the service provider. As mentioned above, this will ultimately hurt your company’s profit margin, customer experience, and your reputation very critically. Discounting without proper checking will threaten your future business prospects. Some alternatives to discounting include showcasing the value of your products and services and providing the most unique solutions to the customers. You can try to eliminate the unnecessary components from your services so that it can fit the budget of the customers. Or you may just leave such a deal where profit-making is complicated and not guaranteed.

At MFhills, our expert advisors can help you to better understand the hazards of discounting. Our advisors will guide you to prepare sales processes and policies which can support rational pricing for a large profit margin. To know more, Contact us on:

Mobile phone: +1 (650) 351 7900

E-mail: admin@mfhills.com