Is discounting an investment?

No, I’m not changing my tune. I still say, “Don’t cut the price, build the brand!” I still advocate competing on value rather than price simply because there is always some short-sighted competitor out there who is willing to give away the store. Just as I believe an undeniable truth is that quality is always cheaper in the long run, I believe building a quality brand experience will yield far more long-term benefits for the organization.

I propose another undeniable truth is that marketing requires an investment of resources.That may mean a huge budget if you’re a huge company or a lot of sweat equity if you’re a small business or startup. An investment in marketing has to be made in order to ultimately yield a return and get you results, which is where a “discount” can be considered less a discount and more of  reallocation of your marketing investment. If you have reason to believe offering a lower price than you’d optimally like to command will yield future benefits significant enough to warrant it, then it may not be such a bad idea.

For example, you might offer your discount in the form of an introductory offer. By taking away some of the perceived risk the customer has, you earn their business sooner. Once you show them value, they should see why your offer is worth the original price and offer less resistance to paying it. Trust is hard to earn, but worth its weight in gold once we have it. If you really have your act together, you’ll build a relationship the customer won’t sever without a very good reason.

Because it’s far more efficient to grow an existing relationship than to build a new one, even if we aren’t able to raise the discounted price right away we stand to benefit from the ongoing cash flow and from the opportunities to gain more of their business on other offers. We may make less than we’d like on a particular product, but if we can count on that discounted cash flow over time, that alone may be worth considering. And if we can grow share-of-customer by involving them with other products, that’s how we can really maximize the profits of the relationship.

A discount isn’t a discount if it ultimately pays for itself!

Why pay a dollar for a bookmark? Why not use the dollar for the bookmark?” – Steven Spielberg