Don’t Let Discounts Kill Your Business

The effects of the recent Great Recession have left many people with a sense of uncertainty over the economy. Perceived consumer attitude is pressuring some companies into lowering prices or offering discounts in order to attract new consumers or to maintain their customer base. I would urge all businesses to seriously consider and examine the effects of price reductions and discounting.

We are slowly moving toward better economic times. If you’re reading this, you have weathered perhaps the worst economic period in your business career. Now, more than ever, is the time to show strength in your company by offering quality customer service and repairs, continued community involvement, continued training, and by remaining positive. All while maintaining profits and building for your future. Discounting to make up for poor profits or weak car counts is a path that may have long lasting negative consequences. Rather than discounting prices, companies need to find ways to build their brand and culture.

Personally, I don’t like discounting my services and repairs. In general, shops give far too much money away as is. I understand as well as anyone the power of a loss leader or discount promotion. There is a place for this type of marketing, but when you realize what a discount costs you, it becomes apparent that we need to be very careful about what and how much we discount. A $10.00 discount can take an additional $100.00 in sales to make up for it, depending on your net profit margin.

One discount I really have an issue with, is the one that’s used to close a sale. Ever notice that your best, loyal customers, never negotiate your price? Those are the customers who need to be rewarded, not those who want to suck profits from your company. If a service advisor needs to use discounts to close a sale, it’s an indication of insufficient training or that you have the wrong person on the counter. Effective service advisor skills are crucial to the success of your company. If you have the wrong person in that position, act quickly. You aren’t doing the right thing for you or for that person, if they are in the wrong position.

Another problem I see is the mindset that we somehow need to offer discounts to attract customers, or to maintain existing customers. I disagree with that thinking. If you are doing all the right things and hire the best people, you should not have to give away the farm in order to attract or retain customers. Would you choose a doctor, dentist, lawyer, or accountant because they’re the cheapest in town? Of course you wouldn’t.

We may not be doctors or lawyers, but we are professionals. Build value in the eyes of your customers, offer outstanding customer service. Create a customer buying experience so powerful that your customers wouldn’t think of going anywhere else. Go the extra mile and reward those customers that patronize you over and over again. Be competitive, but be profitable.

Your business must make a profit. And let’s not confuse breakeven with making a profit. Most shop owners know their breakeven, but some are stumped when questioned; “How much do you need to make above breakeven?” Breakeven only pays the bills of your company and nothing else. Breakeven should never be a goal. Your business must make a profit above breakeven in order to reinvest in your company, put away money for the future, pay for your kid’s education, train your people and do the things that make life fulfilling. Discounting your services can greatly affect this.

Too often discounts attract the wrong customer. Our marketing and advertising should be about branding our business and focusing on our target customer base. The only exception: if your business model is truly a discount store and you have built you business catering to that clientele. Truthfully, I don’t know of many quality shops that advertise, “Come to me, I’m the cheapest around”. Do you?

Advertising should invite the type of customers that fits your business model and those that value all that your company has to offer. If your advertising is always offering discounts, you just may be attracting the customers you don’t want.