Why you should not give discounts to all your customers!
Why you should not give discounts to all your customers!
When you give discounts to all customers, you might see a quick increase in sales. It feels good to have more people buying your products, but several problems can arise immediately.
In this article we go through these matters but more importantly, we show what to do instead!
In this article
Why you should not give discounts to all your customers!
Negative effect of discounting
When you give discounts to all customers, you might see a quick increase in sales. It feels good to have more people buying your products, but several problems can arise immediately.
First and foremost, your revenues decrease because each sold product generates less money. This means your business gets less money directly, negatively affecting your cash flow and profitability.
Customers may also become more price-sensitive and start waiting for discounts before buying anything, leading to uneven sales patterns.
If your customers constantly see your products on sale, they might also start thinking that your products are not worth their full price. This harms your brand’s perception and can cause your brand to lose its premium position in the market.
Is this valid for your business?
You see a clear revenue decrease because each sold product generates less money
Your business gets less money directly, negatively affecting your cash flow and profitability.
Customers have become more price-sensitive. It seems like they have become used to always receiving discounts.
You see uneven sales patterns customers might even wait to buy until you offer a new discount.
But wait, there's even worse problems down the road!
Even though the discounts may give you more customers and higher sales now, they can create bigger problems down the road. When you offer discounts, your margins will shrink, meaning you earn less on each sold product.
When you lower your prices, your competitors may feel forced to do the same, leading to a price war where all companies in the industry earn less money.
If customers get used to always receiving discounts, they will expect it in the future. Customers might refuse to pay full price and wait until the next sale before buying anything.
Discount chasing often attracts customers who are not particularly loyal. They can easily switch to another store if it offers a better discount, making it difficult to build a stable customer base.
The negative effects you will see!
- Reduced Revenues – Each sold product generates less money, reducing your cash flow and profitability.
- Increased Price Sensitivity – Customers can become more price-sensitive and start waiting for discounts before buying anything, leading to uneven sales patterns.
- Lowered Brand Value – If your products are constantly on sale, customers may begin to question their true value.
- Decreased Customer Loyalty – Discounts often attract price-sensitive customers who are not loyal and can easily switch to competitors.
- Long-term Profitability – Continuous discounts can erode your margins, making it difficult to invest in the future of your business
In the long run and in worst case, when your margins become too small and your costs are not covered, it will lead to your business going down.
Why you should not give discounts to all your customers!
So what's the alternative to discount?
Ask your self, – What would be the effect of having your customers compete about your discount?
Why you should not give discounts to all your customers!
By using the values from gamification and letting customers compete for discounts we can set off a strategy effectively offering several key advantages that will contribute to your business’s success.
A prerequisite to success is to let only a small percentage win at the same time that number of percentage gives a fair chance of winning.
The positive effects you will see!
- Increased Engagement and Excitement: Competitions create a sense of excitement and make customers feel special if they win. This emotional connection can strengthen their loyalty to your brand.
- Anticipation and Recurring Visitors: Regular competitions generate anticipation among customers, encouraging them to return and participate again. This repeated engagement helps build a deeper relationship with your customers.
- Preserved Brand Value: By offering discounts selectively through competitions, you maintain the perceived value of your products. Discounts are not always available, which helps in preserving your brand’s premium positioning.
- Customer Loyalty: The excitement and exclusivity of winning a discount foster greater customer loyalty, making them more likely to choose your brand over competitors.
- Improved Customer Experience: Competitions add an element of fun and interactivity to the customer experience, making shopping with your brand more enjoyable and memorable.
- New customers: People liking the your competitions and the chance to win will share with friends. This will happen regardless if they win or not. But especially by winners of course.
But as always, it's all about the money!
You will increase your margins: Since only a limited number of customers receive the discount, not all of your revenues are negatively impacted. This helps in maintaining a healthier profit margin.
You will Increase of full price sales: Competitions motivate customers to make additional purchases. And also the natural trust and value you build generates a customer relationship with more loyal customers. Loyal customers are less price sensitive.
Cost-Effective Marketing: Running competitions is a cost-effective marketing strategy compared to offering blanket discounts, as it targets a smaller group and creates buzz without significantly impacting your margins.
Pay per click Advertising Benchmarks 2024
To sum it up!
Competitions create excitement and make customers feel special. Since only a limited group receives the discount, not all of your revenues are negatively impacted.
Regular competitions create anticipation among customers and can encourage them to return to participate again. This will strengthen their loyalty to your brand.
By offering discounts through competitions, you also maintain the perceived value of the product since the discounts are not always available. This helps engage customers actively, leading to a deeper relationship and greater loyalty.
This leads to higher margins, customer loyalty and better profit!
Why you should not give discounts to all your customers!
Byebuy is built to increase values of gamification
Why you should not give discounts to all your customers!
Byebuy gives you higher margins, more loyal customers and more sales - a better profit!
Why you should not give discounts to all your customers!
Besides of utilizing the values of gamification in a sales context described, Byebuy is built for you to do business with the purpose of increasing the effects of gamification.
Byebuy is built to make you boost and, even more importantly, maintain your sales and profit over time.
Why you should not give discounts to all your customers!
Direct sales! – The sales will in first hand come from the fact that your customer will compete about buying your products. Instead of giving same discounts to every one, you will have them to fight about the discount. You decide how many that have to partake in your contests and also how many that will get to win eg. the discount (see contests).
The winners will pay for their win (your products).
Why you should not give discounts to all your customers!
Full price sales! – People visiting your website see your other offerings (products or services). By having repeated contests you build a natural customer relation and will be able to “stay in peoples mind”.
Being in peoples mind customers will think automatically of you when they need the kind of products or services that you offer.
Why you should not give discounts to all your customers!
Loyal customers! – A contest with the chance to win is a much welcome and accepted message by your customers. You are able to follow click rates, the amount of partakers and the amount of followers.
You easily inform your followers about your contests.
Why you should not give discounts to all your customers!
New customers! – You easily share information about your contest all over social media. But more important, your customers share easily share them on social media. In the system you will find inbuilt and unique incentives that increases the share.
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We clearly see that customers share the contest with their friends. And you will be able to follow that.
Want to find out the psychology behind the results – Click here
