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(Not) Discounting Made Easy

 Nick Roberts

 

Several clients have asked me what to say when asked for a discount as it seems customers sense easy pickings. Knowing how to handle such an enquiry is vital to maintain your margins and indeed, could ensure your very survival.

 

Financial Ruin

At a typical gross margin of 40%, a discount of 10% means that your overall turnover would need to increase by 33% to compensate. For most, their turnover would drop below break-even point leading to financial ruin.

 

Immediate Discount

What message are you sending to the customer if you discount immediately? You think your prices are too high yourself? You were going to rip-off the customer? You have no confidence in your service or product? You will drop further? Next time they can ask for a bigger discount?

 

A Better Way.....

  • Offer them a cheaper product or take out an item to get the message across that value has a price
  • Agree to a discount if they pay there and then
  • Agree if they buy a different product or service where your margin is higher
  • Agree if they sign up for a regular or extended purchasing programme or offer a retrospective discount if they buy a minimum quantity  over a year
  • Agree if they can refer you to a new customer

What to Do Now 

  1. Test some scripts (practicing thoroughly) and don't discount without getting something in return.
  2. Always know your margins across your product or service range so you know when you have the freedom to discount.

I am always surprised when I'm offered a discount when I haven't asked and would have been quite happy to pay the full price.

 

If you have any tax or business queries of any kind telephone 0800 ASK NICK, e-mail nick@abac.co.nz or use "Contact Us" on www.abac.co.nz. The information in this article is of a general nature and should not be relied upon as a substitute for specific advice.

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