LIke steroids, discounts, if used indiscriminately, can lead to serious consequences, which can be detrimental to business
Discounts! And I will see many people perk up. Everyone loves a deal, no matter how big or small. However, some brands have made it a habit and cannot seem to let go of them
Describing discounts as “like steroids” is a metaphorical way of highlighting the powerful impact that discounts can have on consumer behaviour and business performance. Here’s why discounts are sometimes compared to steroids:
- Enhanced Performance: Just as steroids can improve an athlete’s physical performance, discounts can significantly boost a business’s performance, especially in sales and revenue. When consumers envision getting a decent deal, they are more likely to make purchases, leading to increased sales for the business.
- Temporary Boost: Like the quick boost in strength and performance that steroids provide to athletes, discounts can provide a temporary boost to a business’s sales and customer traffic. Companies often use values to create short-term demand spikes or attract customers during specific promotions or deal events.
- Risk of Dependence: Steroids can be addictive for athletes who rely on them to maintain enhanced performance. Similarly, businesses relying heavily on discounts to drive sales may become dependent on them. Over time, this dependence can erode the perceived value of products or services at regular prices, making it easier to sell with discounts.
- Side Effects: Steroids can harm an athlete’s health, and excessive or inappropriate use can lead to negative consequences. In a business context, excessive or poorly planned discounting can have adverse side effects, such as reduced profit margins, brand devaluation, and a potential race to the bottom in pricing.
- Regulatory Concerns: Using steroids in sports is often subject to strict regulations and ethical considerations. Similarly, businesses must navigate various rules and ethical considerations when implementing discounts, such as adhering to pricing laws and ensuring fairness to all customers.
- Performance Gap: When athletes use steroids to achieve exceptional performance, there can be a significant gap between their performance with steroids and their natural abilities. Similarly, discounts can create a gap between a business’s performance during promotional periods and its regular performance, which can be challenging to sustain.
- Long-Term Consequences: Athletes who use steroids may face long-term health consequences. Likewise, businesses that rely too heavily on discounts may face long-term effects, such as diminished brand equity, customer loyalty issues, and increasing prices.
It’s important to note that while discounts can be an essential tool for companies to invite customers and boost short-term sales, they should be used strategically and in moderation. Over-reliance on discounts can harm a business’s financial health and brand reputation. Just as athletes must consider the risks and consequences of using steroids, companies should carefully weigh the pros and cons of discounting as part of their pricing and marketing strategy.
Discounts can be like steroids because they can produce a quick and dramatic increase in sales. However, they can also have adverse side effects, such as:
- Avoidable customers: Discount users are often undesirable consumers that you would rather not recruit. Customers shop with you not because they respect your hard work and contributions to the market, but because of the discounts you provide. Since your regulars will likely not want to mingle with the bargain-hunting hordes, you can expect to see a steady decline in business as time goes on.
- Reduced profit margins: Discounts can reduce profit margins, especially if given too often or for too long.
- Customer price expectations: Customers may always come to expect discounts, which can make it difficult to raise prices in the future.
- Devaluing the brand: Discounts can devalue the brand, especially if given on premium products or services. If your product or service is normally priced at Rs 150, but you suddenly reduce the price to Rs 100, the buyer may conclude that it is only worth Rs 100. That leaves them wondering why they should pay Rs 150 for something they might have for less. They won’t buy from you again until you give them a discount.
- Cannibalization of sales: Discounts on one product or service can cannibalize sales of other products or services.
- Addiction: Like steroids, discounts can be addictive. Businesses may become reliant on deals to generate sales, making it difficult to compete on other factors, such as quality and customer service.
Discounts can be valuable for improving sales, but they should be used sparingly and strategically. Businesses should carefully consider discounts’ potential adverse side effects before implementing them.
Questions You Should Ask
- Have you marketed your company enough to get its name out there?
- Do you have faith in your abilities to run your own company? What would be the reason if not?
- What other methods exist for increasing value in the market besides lowering prices?
- How often will you be releasing updated versions of your products?
- When will this price reduction end? (define a cutoff time)
- What do you think your ideal customers need?
- Can you improve upon, rather than diminish, the worth of what you’re selling?
Some Tips for Using Discounts Effectively
- Target your discounts: Offer discounts to specific customer groups, such as new customers, loyal customers, or customers who spend a certain amount of money.
- Use discounts to promote new products or services: Discounts can bring in new products or services or encourage customers to try a new product or service.
- Limit the duration of your discounts: Only offer discounts sometimes, or customers will come to expect them.
- Use discounts to clear out inventory: Discounts can be used to clear out excess inventory or inventory that is no longer selling well.
- Track the results of your discounts: Track the results of your values to see which ones are effective and which are not.
All in all, I believe in the product, service, ambience, marketing, and branding, with the most important being yourself and your team. I think the key to attracting guests is to put in the best effort to impress them day in and day out while continuously improving, rather than simply relying on ‘discounts.’