Below is our latest Guest Blog from Rick Pontz, industry expert, veteran, and guru in all things lawn and garden. Learn from Rick some of the darks sides of of offering discounts:
When we work with companies on strategies for growth one of the first things we do is develop a real-life business plan that makes profitable sense. The real-life business plan quickly falls apart when the company succumbs to market pressures and starts to seriously discount their products. Some companies discount their products out of habit, some discount out of fear of market or sales loss. And while that may sound like a great strategy discounting can actually hurt your business in the long run.
When many companies we work with are having trouble closing sales on a new product or show an unexpected downturn, instead of focusing on other aspects of the product, they immediately jump to the price. They offer a 15% off discount or “free freight” or an extra 90 days dating. Guess what they see? A spike in sales!
Super! Great! Yes! They’ve done it right. But…then what? Where the real problem lies isn’t with generating sales, it’s what that discount in price represents.
The harsh truth is when you begin discounting your products, you’re sabotaging your business in a subtle way that you might not even see at first. Selling your lawn & garden products at a lower cost can be the start of an ugly cycle. Because you’ve just discounted your products you will now have a shortfall in profits you will need to cover. Another discount program would be an easy fix to the shortfall, right? This is the start of a dark, downward spiral that forces you to keep prices low and before you know it you’re in a hole too deep to get out of. The spiral continues as the only way to get out of this spiral is to compromise product quality, which can cause disillusionment and disappointment among your customers. By offering them discounts, you’re building up a customer base that one day might have to lower its standards rather than pay full price. In this scenario, nobody wins
Here are just a few things that are likely to happen when you discount your lawn & garden products.
1) When you’re offering a discount on your product, what is that saying to your customer or prospect? It’s saying the price you originally quoted them wasn’t your real price. It was your high price. You’re showing your low pricing that they will expect the next time they order or they will believe they are over paying. As soon as you offer a discount, your account or prospect immediately loses confidence in you and your prices and loses confidence they are making the right pricing decisions.
2) When you offer a discount, whether it’s the first sale to the account or your fifteenth sale to the account, there’s no going back. As soon as you lower your price, your customer will expect to see the same thing next time. Or, they’ll hold out until you offer another “special”. And most likely, they won’t purchase without it. And while a discount may seem like that’s your only option, it’s not. You don’t want to set the precedent that every time your customer buys from you, it’s at a discounted price. That’s just bad business.
3) You risk your credibility as a supplier when you discount. This point is especially true when you’re in the middle of the sale, and things start to get sticky. You’ve already laid out the proposal, telling your account or prospect that this is your pricing and support program and the very best that you can do for them. As the conversation continues to spiral downwards, you realize you’re going to lose out on the sale. What do you do? Offer a discount, of course!
While your prospect might be thrilled at the time to get a lower price, in the back of their mind they’re also saying, “Wait, but they already told me this is the very best they could do and now they’re offering me a discount? What else haven’t they been honest about?” You’re stirring up questions that should never be there in the first place. And even if this particular deal goes through, you’ve set the stage for questions and mistrust in future engagements.
4) When your conversation with an account or prospect is focused on pricing and discounts you lose your leverage to focus on other more important things such as your accounts needs / sell-through expectations, business challenges and how your company is offering the ideal solution and value. And in the long run, it’s hard to sell something based on its price than on its value. Every time you focus on pricing and discounts takes you one step closer to being a commodity.
5) It is hard enough to compete with your competitors every day, it’s even more difficult to compete with them making less profit than they do. If you discount by 50%, what does that do to your sales? It means that in order to hit your same revenue goal, you’re going to have to sell twice as much. Do you have the time or the manpower to do that? Look at it in reverse. Your competitor only has to sell half of much as you do to make the same profits as you.
There really is a place for discounts within the lawn & garden products sector. Smart discounting are discount programs that are well thought out in advance, have targets and success measurement tools. Discounts should not be your everyday fallback position.
