It happened again this morning. I received an email from someone I consider to be a smart marketer and who has a depth of knowledge that I respect. She was offering new pricing for her services that are a deep discount on her past prices. Why is this pertinent to the post title? It's because I've seen her drop her prices several times in the last year and it appears that she has made a rookie marketing strategy mistake of discounting her services.
Why isn't discounting a good strategy?
History is littered with corpses of once great companies that tried to race to the lowest price. When is the last time you shopped at a Kmart? Do you even remember Woolworth's or Kreskes. Walmart, as big as it is is even beginning to show some kinks in it's armor.
It also sounds like shes desperate. Do you want to do business with someone who's desperate? I know I don't for a number of reasons. First how did they become desperate? Do they suck? If you're going to offer a discount you need to tell me why you're desperate for the cash. Second desperate people tend to get themselves in over their heads and end up never delivering. I've seen it many times.
You don't want discount customers
The other problem with discounting is the type of customers it attracts. Spend an hour on a Saturday at WalMart, is that who you want as your customer? Discount customers are discount customers because they can't afford better or they don't value you and your services enough to pay what they are worth. Not only will you be stuck with these customers, but you will find that they tend to be the most difficult and demanding customers as well.
What about the customers that paid full price?
Have you ever bought something and then saw it in another store for less or an ad where it was discounted? How did you feel? Do you want your customers feeling like that? Dropping your prices can cause a negative backlash from your current customers.
But sales are good aren't they?
Occasional sales are great, but they need to have a reason and a limit on them. If she had said I just had a big project reschedule and I have time to take on 5 more clients this week at a discounted rate. That would have been fine, it still maintains her value, gives a good reason why and gets her the cash infusion she needs.
The key in any business, but even more so as a consultant is that we need to value our time first before we can expect anyone else to value it. I'll do a follow up post explaining some of the things that I have done to maintain my value.
.
