Today it might be you, but tomorrow it will almost certainly be someone else. Instead of losing money on discounts, put resources into customer retention efforts such as rewards points or trade-in specials. Undeniably, customers shop around for good prices. Help them stretch monthly payments over a longer term with Clicklease. Worse, if fast food becomes a habit, that habit will put you in a bad spot down the road. First, a quick clarification. Both promotions and discounts have a similar, two-fold goal: prompt the customer to take action and create urgency that motivates customers to act right now.
But discounting leads with price and scoring a deal, whereas promotions done well lead with the value of your product. Subscribe to our newsletter to get more just like it, sent straight to your inbox every week. Note that none of the effects below are short-term.
They start off imperceptible, but they grow into something that devastates your brand. Discounts hack into your margins and reduce your total revenue.
You bring in less profit compared to other incentives such as a free gift with purchase or free shipping over a certain threshold.
Whereas promotions such as a free gift with purchase correlated with higher lifetime value compared to percentage discounts. But over time, these frequent discounts desensitize customers to the thrill of a deal. Instead of prompting action and urgency, you train customers to sit back and wait.
Think about it: when was the last time you paid full price for an item from Michaels or Bed Bath and Beyond? For example, when we reviewed Native Deodorant check out the podcast episode , we discovered a countdown timer on their site.
Only, when you waited it out, you could still sign up for the giveaway. Another fake urgency tactic shows up on checkout screens. If that scarcity is true, it can be crazy effective. There are much healthier ways to drive genuine urgency. Brands attract 7 types of customers :. When you train customers to expect discounts and disproportionately attract coupon-clippers, you fast-track your transition to a deal buster brand.
When you compete on price, you enter your brand in a race to the bottom. Because price cuts are the easiest thing for you to implement, they are also the easiest thing for your competitors to match. Enough results have come in for us to assert that the numbers back up our above analysis.
Even though it varies by product, industry, etc. As such, an entry-level tier allows you to still drive folks to your main product, but allows you to capture customers with a lower willingness to pay. Thus, giving you an opportunity to wine and dine them at a lower service level until they convert to a higher, more ideal tier.
You should check out our analysis of freemium here to learn more about proper implementation. Instead, add more units, more user seats, premium service, etc. Whether the price for your product or service is optimal for maximizing revenue is irrelevant to understanding the trigger features and value propositions of your customer. Way too many software companies run rough shot marketing practices that spew the same message to everyone. Overall, we obviously don't expect you to retool your entire pricing strategy over night, especially if your customers are already conditioned into discounts.
Keep in mind though, we want you to move toward a more sustainable, revenue maximizing strategy. The payoff is enormous and it's not difficult, but it does require some work. We're here to help! Tags: pricing strategy. Guide: How to optimize your pricing strategy with data.
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