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Discounts. They can be a valuable marketing tool or a destructive disaster. It all depends on how you use them.
I can easily remember my days as a marketing student, learning about price-driven incentives and promotions – the good and the bad. Years later in the corporate world, I frequently sat in conference rooms with my colleagues and discussed the results of promotion after promotion. Analyzing the optimal frequency and discount that would grow our sales without cheapening our brand image or eroding our day-to-day sales.
So when it came time to open my Pilates studio, I was very fortunate to know the ins and outs of discounting and how it could both help and hurt my business. This helped me to steer clear of some common discounting pitfalls and grow my business without turning my clients into sale-shoppers or discount-seekers. Here is what I feel every business owner should understand about discounting.
The benefit of discounting:
It helps drive purchases. It’s an incentive that creates urgency to prompt clients to take action NOW instead of later on, or not at all. In this way, discounting can truly help bring in new clients or make existing clients buy more. Sounds great, right?
The negative side effects of discounting:
1. It can devalue your services. Because of something called the price/quality relationship*, the more you discount, the more clients see your product or service as being of lower quality and only worth the lower discounted price. Think about the most luxurious and high-end brands that you know. Do you see them running 30% off sales? And if you saw them frequently offering sales and discounts, wouldn’t that change your perception of their brand and what they are offering?
*Price/Quality Relationship: The perception by most consumers that a relatively high price is a sign of good quality; the belief in this relationship is most important with complex products that are hard to test, and experiential products that cannot be tested until used such as most services.
2. It trains clients to shop on discount. The more frequently clients see you discount, the more likely they are to wait for your next discount to purchase. No one wants to feel like a chump for paying full price two weeks ago when they see a new discount pop up! And when clients start to trade full-price purchases for discounted purchases, your sales will drop. So will their frequency if they are holding out for a sale.
3. It sends a little signal of desperation. Discounting can signal that your business doesn’t have enough clients willing to pay full price; that you need to drop your price to get sales. The more frequently you discount, the more desperate it can make you look. This can hurt your reputation and make your business look like it’s struggling and unsuccessful. That doesn’t attract the kind of clients that you want to have.
Now as I said, discounts can be a valuable marketing tool or a destructive disaster. It all depends on how you use them. When used strategically, discounts can help grow your business in a positive, sustainable way. So here are 3 easy, effective guidelines to follow to help you enjoy the benefit of discounts with minimal negative side effects.
1. Watch your frequency. The more frequently you offer discounts, the more your business will suffer the side effects. There is no hard, fast rule for how frequently you should offer a discount (unless you are a big company with tons of sales data to analyze and draw conclusions from), so tread carefully, listen to your gut, and watch your clients. Err on the side of discounting less because once you get a reputation for discounting a lot, it’s REALLY hard if not impossible to retrain your clients (ask J.C.Penney how that worked for them).
P.S. Don’t go deep with your discounts either (i.e. 30-50% off). It will cause the same problems.
2. Make clients work for their discounts. This turns your discount into a fair and understood exchange where both parties benefit, instead of something you just give away arbitrarily. This is why new client discounts are appropriate for fitness studios to offer. Clients are taking a risk by trying an unknown service. In exchange for that risk, the studio offers a moderate discount. This is also why it’s appropriate to offer a discount for a bundled package where clients are buying more in quantity, variety, or required to come to class more frequently than usual.
3. Attach discounts to a special event, program, or celebration. There needs to be a clear, unique reason for a discount and limited-time feeling associated with it. Just running a 15% off summer sale is not enough. The existence of summer is not a special event. However, if you created a big summer event at your studio to celebrate the end of an especially long, cold winter (like we had in the U.S. this year!) and included the launch of a new outdoor workout class, a new studio-branded tank top and beach towel, ran a summer attendance challenge, and then offered a discounted service or package associated with the event…that would be more like it!
If you use these guiding principles when offering discounts at your studio, it will help keep your business financially healthy, and keep clients appreciating and willing to pay appropriately for the high quality of services that you offer.
Dana Auriemma Bio
Dana started her professional career in marketing and sales working for Fortune 500 companies, but later moved out of the corporate world to pursue her passion in fitness. She opened, grew, and sold a successful Pilates studio and is now dedicated to helping other studio owners and instructors master the business skills they need to reach their full potential. Dana offers custom consulting, online business courses, and publishes free training articles. Visit her at danaauriemma.com and on Facebook
