Why We Don't Do Discounts... And Why You Shouldn't Either

Everybody likes a good discount. But discounts have serious downsides.

For one, if you're going to have an on-going relationship with the customer, say they're a coaching client, part of a program with live interaction elements, or a software user, then you want to make sure you cater to the kind of customer that you want to have as a customer.

Generally speaking, the people who haggle over money almost always turn out to be a hassle in other instances. People who happily pay the price generally end up being your easiest, best customers.

This is what I've learned from others, and from my own experience, and I'm very conscious about not trying to cater to people who are going to be trouble. We've created a very successful business with a very small team, and minimal fuss and drama, and the only way that's possible, is by eliminating possible sources of drama and frustration and extra work everywhere it shows up.

And believe me, there's plenty of opportunity for small exceptions, discounts, tweaks, changes, that quickly mushroom into something that eats up way more energy than it's worth. Not our style.

The other things is that offering discounts tends to train your customers to expect discounts. Since getting into music myself, I've started to invest in a bunch of music software. Software synths, audio effects processors, sample packs, and on and on. And one thing I've learned is that these people love their discounts. And what it's trained me to do is to almost never buy anything except when there's a substantial discount.

So now you end up in a situation where a significant part of your revenue is coming in via the discount,  i.e. not at full price. And remember, your costs are the same, so the discount is coming entirely out of your profit.

And because your customers quickly come to expect that a sale will come up in the next few months, your habit of discounting is actively causing people to hold off on buying from you.

Also worth considering is that those that do pay full price might feel cheated. And now you have to possibly make exceptions for the people who bought just before the discount, or maybe just after, and it quickly ends up in a lot of hassle.

Discounting your product also tends to devalue the product in the minds of your customers. Another possibly lasting effect.

A lot of people love to do discounts, of course, and I'm assuming that at least some of them have done the math and the tests and thought things through and decided that, everything considered, it's worth it.

For us, though, it's not, and I'd strongly suggest that you consider going against the trends on this one, too, so that you can focus your energy on the bigger things in life and business.

One benefit is creating a sense of urgency which can get people to pull the trigger and hit buy. You can also effectively do this with a loss leader, where the point of the transaction is to acquire a customer, which then will buy other higher-priced products from you in the future. You just have to be careful about which products you discount.

I do like how Apple goes about this, though. They don't discount their products. Instead they'll offer a $150 gift certificate on top of certain products on Black Friday. That way they don't devalue their product, they don't lose revenue, and that $150 gift certificate is going to be spent on another product, which costs them less than $150, which means they're effectively only giving a discount of, say, $75. On top of that, a lot of customers are going to use that gift certificate to buy something a lot more expensive than $150, so probably end up with better net profit using this method.

I forget who said it, but the reality is that 99% of other people do not live a life that you want to copy. So you can be pretty sure that if you do the exact opposite of what most people do, you're right on track.