While offering discounts can be an effective strategy in certain situations, there are also scenarios where discounting products and services can be a bad idea. 

Here are 14 reasons why discounting your prices could hurt your business:  

  1. It attracts the wrong type of customers - deal seekers that will only buy from you again when you offer more discounts.   These are “groupon” customers.   Steer clear of them and let them stay on groupon.  
  1. It kills your profit margins.  
  1. It harms the perceived value of your products and services.  Discounting erodes the perceived value of your products and services.    Customers will start to associate your brand with low-quality.  
  1. It harms your overall brand image - discounts can undermine your brand’s image as a premium or high-valued provider - which becomes a challenge to reposition your brand in the future 
  1. It “commoditizes” your business.    You become like groupon where people are only attracted to your business based on price = which is always a race to the BOTTOM.   In the commoditized business model - the lowest price wins 100% of the time. 
  1. It sets the wrong customer expectations:   Regular discounts can set the expectation that your products and services  are always available at a reduced price.   Customers will then wait for discounts before making a purchase - which will hurt your regular sales.  
  1. It damages customer loyalty:   Relying on discounts as a primary strategy to attract and retain customers can lead to transactional relationships- where a purchase is only made when a discount is provided. 
  1. It can lead to significant losses in revenue if the discounted prices aren’t balanced by full-priced sales. 
  1. It can lead to negative cash flow:   Discounting can lead to cash flow problems - especially if you have to acquire more inventory or resources to meet increased demand. 
  1. It can be difficult to reverse discounting:  Once you have trained your customers to expect discounts, it can be challenging to revert to regular prices without alienating them.
  1. Loss of control over your brand:   If you use third party sites like “Groupon”, you can easily lose control over your brand's presentation and customer experience. 
  1. It can create a bad market perception:    Heavy discounting can signal financial distress or a lack of confidence in your products or services, which may deter potential & existing customers. 
  1. It may cause you to sacrifice quality:   To maintain profitability while offering discounts, you may be forced to compromise on products/service quality, which can damage your reputation long term.

     14. Lastly, discounting prices is not sustainable long term.   Relying on discounts for growth is not a       sustainable strategy as it does not address core issues such as product-market fit, customer retention or innovation.     

There are some cases where offering a small discount may make sense (ex:  Birthday offers) .. but businesses that make a habit out of discounting prices to gain new customers are usually in for a rude awakening when their profits tank.  

Jesse Erickson

About the author

🔥.  I have an intense passion for helping businesses improve how they market, sell and fulfill their products and services.    My goal with every business I work with is to build predictable revenue each month so that they can focus on what they do best = serve their customers!