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The dirty discount: cutting the cost won’t help you clean up with your customers

Paul-Black_CEO_sales-iBy Paul Black, CEO, sales-i

Discounting has become a relied-on option for many salespeople in the cleaning supplies industry, and it’s not hard to see why. The easiest way to be competitive is to offer comparable goods at a lower price than your market rivals. But the gains from this approach are by nature short term and unsustainable – and they can cause issues that, at best, prevent any significant increase in profits.

Why do salespeople discount their products?
The logic of discounting is easy for salespeople to understand. Lowering prices should, in theory, increase peoples’ appetite to buy. During Black Friday and Cyber Monday, consumers queue outside retail stores for hours (or wait patiently behind their keyboards) looking to snap up the best bargains before someone else does. Some companies that make a loss during the rest of the year only start turning a profit when these ‘event’ days roll around.

Discounting in the cleaning supplies industry isn’t nearly as widespread – there’s no Squeaky-Clean Saturday or Miracle Mop Monday to speak of – but that doesn’t mean that it isn’t a popular tactic. It’s an easy way to get a hesitant customer to buy, and the short-term revenue boost can make meeting targets a simpler task.

The fact that cleaning supplies products aren’t always easy to differentiate only incentivises the salesperson. Many believe that consumers don’t have favourite brands of product, and that they want whatever will do the job for the least money.

Why discounting doesn’t work
Discounting doesn’t work because it’s tactical rather than strategic. The short-term uptick in revenue can, according to research from Inc, lead to a downturn in earnings: a one per cent discount can, for example, lower operating profits by eight per cent. The same study found that some 40 per cent of customers would buy an item irrespective of any cut in the overall price.

So discounting isn’t merely lazy: it’s actively harmful to your business. At some point, you won’t be able to undercut your market rivals any more – and by that time, you may well be seen as a budget brand in the eyes of your customers. This is a perception that’s very hard to shift: when a customer gets a discount on their first purchase, they typically won’t want to pay more for subsequent transactions. You end up competing on price, rather than value, which attracts short-term customers who can’t be relied on to buy from you again. Given that research from McKinsey found that loyal customers spend 67 per cent more on brands than new customers, this can turn into a serious problem.

Making money without slashing stock prices
So if you can’t discount, what can you do?

More than you might think. The first thing to do is adopt a needs-based approach to your sales strategy. What do your customers want, and how can you give it to them? Will it require changing the brooms, mops, and buckets you have in stock, or offering them as some kind of package deal? Most importantly, how are you helping them meet their business goals?

When you have the right answers, it’s time to think about specific improvements. Can you sell liquid cleaning products alongside mops and buckets? Is there appetite among your target audience for brooms? Customers will always appreciate the opportunity to consolidate their shopping in one place – give it to them.

salesiWhen you’ve got these customers on side, it’s time to think about turning them into brand ambassadors. If you can get them to shout about your company, you can bring in new business without deploying your sales team. A great reference or testimonial can do far more for your company than any discount.

This is because discounts ultimately beget further discounts. When you lower the value of your offering, you do so across the board – causing your rivals to do exactly the same to you. This harms the market and fair competition, and it does your business no good in the long term.

When you devalue your products, you devalue your business. So don’t do it. Your customers will pay a good price if you give them reason to.

 

About Sarah OBeirne

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