written by
Edwin Ting

Discount Magic

Business 1 min read

I’m amazed at the amount of discount given during Singapore’s National Day, on 9 Aug. Before and after the holiday, retailers were discounting heavily to get sales. There was 54-everything. Singapore is 54 this year of 2019.

And, who doesn’t love a good discount?

Hmm, businesses.

Well, most small businesses who operate on small margins or have small scale.

But, we all know a good discount attracts customers to buy, yet business must be careful to not overuse discount as an incentive mechanism. This causes customers to be de-sensitised to discounts and expect discount as a norm.

Yet, in a real business, not an inflated one, discounts eat into margins and the long term feasibility of a business is impacted.

Even for large, well funded technology companies, i.e. Grab, etc, it is not feasible to be giving unlimited discount coupons as it impacts their business profitability.

This becomes even more apparent for small and medium businesses who have not reached significant scale. Discounting buys you market share, but always at a cost.

What if the discount stops? Will the customer still make a purchase?

What if a competitor gives an even larger discount? Will your business be able to afford an even larger price cut?

At the end of the day, your product or service should provide a value that customers are willing to pay for. You will have to determine what that value is and what the appropriate price point is. Then you need to hold your ground and tell your story.

If that doesn’t work, maybe your product or service doesn’t have that said value.

If that doesn’t work, maybe the pricing is too high for the perceivedvalue. Remember the keyword here is perceived value, or how the customer thinks about the value they are getting.

If that doesn’t work, maybe you don’t have a product market fit. Or, maybe it’s not the right timing.

Figure out your value and you shouldn’t have to be discounting all the time.