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Introduction

Discounting has long been a topic of debate among businesses. While it may seem like an attractive strategy to drive sales and increase profits, discounting should be approached with caution. In this blog post, we will delve into the intricacies of discounting, exploring when it can be beneficial and the potential drawbacks it carries. By understanding the nuances of discounting, you can make informed decisions for your business.

It's the supermarket success story of the year – sales at German discounter Aldi have risen above £8bn in the past year, which is up by around 13% on last year's figures.  It's definitely not the same joyful tale for Tesco, Sainsbury's, Morrisons et al who have seen much smaller growth for 2016.  Asda, which has always prided itself on being the “cheapest” of the big supermarket chains saw a growth of only 1% last year.

Do your sales people frequently offer discounts before they should?  Has it become almost an addiction in order to get a sale? This is indeed very bad news for your profitability and future prospects.

Have you already decided on the base price of your products or services?  Congratulations!  However, what about your policies regarding discounting?  There are many different forms of implementing price reductions, each designed to accomplish a specific purpose. 

Do you assume that your sales staff will always implement your current pricing strategy to the letter?  This could prove to be a dangerous assumption.

It's a fact that sales people often offer discounts before they should and this can potentially have a devastating affect on your bottom line - in fact it could just be considered an act of sabotage!

In a free market, competition is the norm, not the exception, and that competition will affect how you price. When competitors lower prices or new competition enters at a lower price, it is perhaps only natural to want to beat them at their own game - but the cost of price concessions may be higher than the cost of losing a customer or two.