If you sell at a lower a price, that is the amount the customer is used to seeing on their invoice, and the value they will ascribe to your product.
Once their mind is set, it can be very challenging to convince them to pay more.
If, however, you offer – and invoice – with a detailed discount (i.e. you note the original price, discount percentage, discount amount and final total), there is a big difference in the message you are sending the customer:
- You are giving them the positive reassurance that they’ve made a good deal; they can see the discounted amount that they’ve secured themselves – and everyone likes a good discount!
- You keep the original price in their mind (albeit probably towards the back of their mind…). This helps establish your value assessment of your product, not theirs.
- You give yourself a better, mutually understood framework to manoeuvre with price, in terms of reducing the discount in future
(N.B. reducing the discount, not increasing the price)
If you combine discounts with other sales tactics (like temporal-based ones) it can be even more powerful:
Offering a discounted rate on the first few invoices of a new contract – e.g. 50% off for the first three months – can be a very effective tactic in winning new business.
Then, once those three months are up, if the customer continues, they will expect to pay more.
Of course, you may not get the full 100% amount from the fourth month onwards (if the three months were just a trial of your services, for example) but it does give you room to negotiate, perhaps meeting at half-way, i.e. a 25% discount, for the following three months.
However you use it, offering discounts – rather than lowering your price – is a more effective, long-term sales tactic to ensure you maximise your profits.
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