First, this is not about the products and services a small business might buy.  It is about the opportunities and tools price discounts offer for most small businesses.

But, before we talk about discounts we must talk about prices!  The price you offer your customers for your products or services.  I have counseled well over 200 small businesses and find that most of them, I estimate 90%, have prices that are lower than competitively they should be.  So why is this?  There are more reasons than I can cover within this short space so let’s just blame it on a combination of not knowing the value of the product/service or “market price” and a fear of losing some sales! The first fault is because of not being really knowledgeable of the market and comparing unlike offerings so that businesses ends up giving away some of the possible benefits of their offering in an attempt to match prices.  The second is emotional, but if you really know the market price you can try to overcome the tendency this uncertainty generates.

Now, I know that if you already have your prices established it will be a little painful to raise your prices as it always is.  One thing you can do to reduce the pain is to slightly modify your service to give an extra benefit in parallel with your increase.  And, of course, there is inflation and increased gas prices that can provide an excuse to explain the increase.  In any case let’s now assume you have now increased your prices to at or slightly above competition. Now let’s talk about discounts

Why are discounts a “friend” of successful small businesses?  There are many, but let me name a few of the ways you can utilize them to improve your business.  Everyone likes a sale and they usually attract more customers and attention, but if you notice carefully they are usually associated with some reason like overstocked, end of summer, and hundreds of others.  Be sure you always obey the cardinal rule of “never lower prices without a reason”. Also always tie a discount to a specific time period, and if possible, targeted at a specific type of customer or a specific condition.  Examples beyond the ones mentioned might be “buy two, get one free”, “only for the month of April”, “for first time customers” etc.  Note: you get to control the amount, the time, the qualifiers, and the specific product or service discounted

 You might be paying a lot for advertising, do you know if it is working?  You should always try to track your advertising to see if it is a good value and you can do this by offering discount coupons or code numbers for customers to use from the advertisement and in this way you know how many have come because of the ad.  This is one of the few accurate methods of measuring advertising or other promotional costs.

You can also offer frequent valued customers special discounts.  Perhaps even more helpful, you can give them discounts if they refer a new customer to you! 

These are all general suggestions and there are many more for specific types of businesses but remember unless you are a not for profit business, you certainly must price things at a level where discounts still mean you will make a profit and remain a healthy successful business!

If this sounds like something you would like to know more about, visit one of our seminars or talk to a SCORE counselor by appointment at no charge.

Ed. Note: The author, Bob Goedjen, is a  counselor with the Silicon Valley SCORE chapter. Bob is available for counseling sessions.  Call the office at 408-288-8479 to schedule an appointment.