Question from a reader:”Help me. Kim, I am discounting a lot of my goods, I have a web site but I am getting killed because I can’t keep this up. My cost of doing business is going up and my profit margin is down. I am thinking of just telling people who are constantly email me that the discounting is going away – maybe not forever but for a long time. Your thoughts?”
Hmmm. My thoughts are that you may have to start carrying items if you can that are across the board set at roughly the same market price. I am talking about a price somewhere between price fixing and five finger discount. For the benefit of my international readership I mean a price between business collusion and shoplifting – the ultimate range between control of the market and total loss of control.
If you can kill the client with service, they may come back to you if you have something priced middle tier with everybody else. In the current economic Depression we are in (and we may not be out of it for awhile), you need to balance the perception of having to discount. You already know my stance that it isn’t profitable to stay in business if you are losing cash. If you are selling something that everybody else is selling, say Twilight dvds or Blu Rays, you may need to lower your prices to a price point where you can move the merchandise.
If you are selling something like medicinal services, you may be able to set a happy medium price. The reason I chose that is because if one is sick, they won’t quibble for the price however if they are thinking of cosmetic surgery they will balk at higher prices even if they are interested in getting better looking for their vanity.
It is tough to not discount through the web however if it looks like you are losing money, you either want to get out of the business, that particular line of goods or jack up your prices a little bit to get things under control and to keep your income stream as a positive one.
Getting back to service, are you doing anything that is uniquely you (that was an old marketing buzz phrase back in the dinosaur times of business) that sets yourself apart in service?
One drop shipper would arrange to throw in a small free sample of cds back in the day when I would order bulk cds by mail. Not bad and it was a kick and I would stay and order from him for a long time. That may not be a great example because it costs you some money but the cost, maybe 5 cents on a cd was negligible compared to the goodwill that it generated and kept me hooked as a customer for months if not years.
If you have a store or restaurant, you can keep customers coming back by giving them their space and being ready to answer their questions and giving them great sales support. Not everybody looks for the warehouse marketing approach and bag your own groceries especially depending on what it is you are hawking (as stated before).
If you are selling high end sports cars (if you are lucky to make a living at it), there is a snooty sense that you will be going into an “exclusive club” and would be expected to pay more. As hard as it is to believe, there are people who still are buying six figure cars though not quite in the numbers that they might have been sold for previously.
Same holds true for hairdressers, stylists and barbers. What keeps people coming back again and again is the professionalism and the demeanor of the workers who take care and take the time to shmooze, care about one’s family, etc. It also tends to insure that you will get something as an earned tip.
Note that I said “earned” in the previous sentence.
Too many people feel that getting a tip is a requirement if they are servicing you. As I have ranted about before, just because you are making minimum wage doesn’t mean I have to pick up the tab for the rest of your salary. You need to earn the money and that is why it is called a “tip” and not a “mandatory payment to a person who isn’t in your employment but somebody else is generating a W-2 for him”.
Interesting to look at things that way, huh?
Getting back to your web discounting question…
I would consider limiting the discounts and maybe still have a few on some items but not go whole hog anyways. People will always look for the lowest price they can find but after the spend for shipping, handling and other things that help drive up the cost, not to mention the chance of shoddy merchandise falling part, you may want to stick to your guns on a few solid prices where you can make some money on the mark up.
Another reminder is that just because your clients know your discount price or your wholesale price doesn’t mean you have to sell them the product at a loss or at a price that is ridiculous.
Back in the day when I use to sell comic books and collectible items at conventions and swap meets, I would have people who would come up to me and want to buy books, pogs or cards at my discount price or just above it. They would get very pushy and eventually I would tell them to pound sand and hit the bricks.
If it looks like too many people are expecting you to give away the farm for free, you may as well enjoy the cows and pigs yourself by keeping your prices at a price point where you can make some money and where you can avoid a loss leader, even a small one, go with that and point it out and scream it to your customers that “See? I am discounting, now buy something!”
Let me know how many customers end up buying things if you implement any of these changes please and good luck!
June 04 2009
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Kim Isaac Greenblatt
Discounting Is Killing Me Kim Help