Are you paying for discounting?

Posted by Bartercard on Jun 7, 2017 9:44:19 AM

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With such fierce competition and all consumers looking to bag a bargain, it’s no wonder they turn to discount websites such as GrabOne, TreatMe and Groupon for offers. Why wouldn’t you? But as a merchant and small business owner, have you worked out the real cost of discounting and the impact it has on your business? Daily deal websites charge a fee of approximately 15-20% of the sale price and stipulate that the offer presented must be at least 50% off the original sale price. 

It’s easy to think by offering a discount you’ll attract new customers and they’ll leave happy because they haven’t paid full price, but discounts cost money, and not just to your bottom line.  

For example

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So by reducing your price by just 10% on a margin of 40%, your sales have to increase by 33% in order to make the same profit. That’s a big ask in a competitive market, especially when you add a fee onto that.

Discounting can also have an impact on your brand reputation as highlighted in an article, when an Auckland pizzeria refused to accept a customer’s GrabOne voucher. All these aspects impact your bottom line.

Bartercard is not a discount service and while there are fees associated with being a member of the network, it’s a mere 7.5% in comparison. Bartercard allows members to grow sales by 10% or more within the first 12 months of becoming a member and we can prove it (Dot Loves Data, 2014) – no discounts are required!

So do your sums. Does it add up to offer discounts both from a profit and customer perspective? Ask yourself this – are your customers loyal or are they just hunting for the next deal?

As a merchant, are you wanting more customers or have excess capacity you want to utilise? Download our eBook “Eight ways to attract new customers” which shows you how you can implement new techniques to increase your market share, gain competitive advantage and achieve financial success. Download now.  

 

Topics: growing your business, sme, business strategies

 

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