How to Make Discounting Work

Are discounts really that bad? They get certain people to buy. For example, my fiancée is adamant about eating organic foods, but I was surprised one day when she came home with a box of inorganic cookies. “There was a coupon and I had to try it.”

On the other hand, I understand how discounts can diminish your value. It removes barriers to entry, the very cornerstone of luxury businesses.

But … how do you explain this paradigm for valued brands that use coupons? The brands that I speak of include

Pinkberry
Chipotle Mexican Grill
Regal Entertainment Group
Whole Foods Market

In both economics and marketing, the concept of price discrimination is a healthy way to capitalize on certain target markets that may not have purchased in the first place. In economics, there is a whole idea called Consumer and Producer Surplus. I won’t get into details because it is difficult to explain in a brief manner, but you’re welcome to Google it.

For example, how are theaters able to price tickets differently and get away with the delivering the same quality product?

$15 regular admission but
$9 for matinee (before noon), students, and senior citizens?

new york city

If the price was not reduced,

unemployed individuals (might not have work before noon or any work at all)
children / students (might not have expendable income)
senior citizens (might not have jobs nor much interest in flicks)

… may not go to the theater.

The cinema is already paying for the fixed costs of rent and utilities, regardless if there are patrons or not. Therefore, by reducing the price by a bit, theaters could attract those who might not have even gone in the first place!

In regards to photography, your fixed costs of website hosting, camera equipment, and so forth, won’t change regardless if you have no customers or lots of them.

If you are already very busy with business, then there’s no need to discriminate. However, let’s pretend that you are at 80% capacity and have time to take on a few more jobs; you could attract people with lower affordability by discounting your rate and look good at the same time. Use the same strategy — apply price discrimination in relationship to how much work you already have and how much more you want to take on.

The magic lies in strategy and wording. If you support the military, local teachers, honor students, or quite frankly, it could be anything, give that group of people a discounted price.

street musicians

Depending on your craft, you could give military brides a deal or local educator’s dogs a pet discount! Not only do you bring in extra revenue, but you also look good for offering such a service to these revered groups of people!

Just make sure that you set limitations. Remember Sarah’s story? Add barriers. For instance, you could restrict it to eight bookings a year. Remember that this is the strategy. There are many ways to apply this tactic. Be creative!

Another option, which requires more effort, is to simply create a whole new company to capture the lower or higher end of clients. However, think about how much effort it takes to run your current business? Imagine two or three!