Why Offering Discounts Will Put You Out of Business

Why Offering Discounts Will Put You Out of Business

I used to believe that giving people discounts would make you more money, but that’s not the case. Today I’m going to share with you why discounting is the wrong strategy and it will put you out of business.

RESOURCES & LINKS:
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Discounting is for Dummies – Here’s Why And What to Do Instead (video): https://youtu.be/vwZeqbYZS_Q

The RIGHT Way to Drive More Online Sales By Discounting Your Products (video): https://youtu.be/X-QgSpzub0s
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Most people think that “Hey, Cyber Monday, Black Friday, big corporate contracts, why not give discounts? I’m making good money, I have good margins. It’s a great way to boost my sales.”

That’s a wrong philosophy.

What works for Amazon won’t work for you. What works for Macy’s, or Nordstrom, all these other big companies, in most cases, won’t work for you.

And especially if you’re in B2B or in the enterprise world you should never give discounts. It’s the worst thing that you can do.

The first reason why is it sets a bad precedent. You don’t wanna set a bad precedent. The moment you do that, what you’ll find is when people are like, “Oh yeah, you’ll give me a discount? Cool, what else can I get from you?”

They’ll keep asking you for more and more and it’ll never stop.

In addition to that, they’ll also ask you to do more things in the same price. That’s going to attract customers that are the wrong fit for your business.

In which, you’re going to be doing work for them, you’re going to be miserable, they’re not going to be satisfied because you’re not doing a good job for all the extra things that they’ve asked you for.

Plus, you’re not really making any money. You don’t wanna be in that position.

The second thing that I learned is it ruins your brand.

Yeah, the people who buy stuff at a discount may be happy, but all your normal customers who buy from you, which is a majority during normal times, will not be happy because they’re not getting the discount.

You don’t wanna ruin your brand. And if you don’t wanna ruin your brand, stop offering all of these promotions.

Sure during the holiday times, yeah, you may get a boost of sales, but it doesn’t last for long.

And let me go into the third lesson I learned why you shouldn’t be offering discounts. And this is somewhat related to number two.

Now one of my companies, we used to offer a discount.

We found that when we offered a discount, the people who signed up not only grumbled more, caused more support issues, but they churned 29% faster.

Not only were they paying us less, but they were also grumbling more causing more support requests, and they were churning much faster and it was causing us to make less money.

For that reason, we stopped offering discounts altogether.

The fourth reason is you devalue your product or service. You’re going to look cheap. You wanna go upstream, that’s how you make more money.

Devaluing your price, discounting it, is not going to get you there. What you’re going to find is, if you’re giving a discount, people like, “Oh, wow, this isn’t the premiere solution.”

You’re not going to go to Goldman Sachs and ask them for a discount. You’re not going to go to a big company and expect them to bend over backward and give you the price that you want.

That’s not how the world works. Because they know if they give you a discount, they’re going to reduce their margins, they’re not going to be able to provide the service that your customer deserves.

And you gotta think about it. With my ad agency Neil Patel Digital, we help companies grow their marketing. We get them more traffic, more sales. When people come to us asking for a discount, and if we gave them, and we do not do this, but if we give it to them, we won’t be able to provide them the same service because it screws up our margins and in some cases, or in many cases, we can actually lose money on an account.

Why would we want to do that? Because if we lose money, we’re not going to be happy.

There’s no point in us working and actually putting money out of our pocket to fulfill a client.

And the last lesson I have for you is you’re attracting the wrong type of customers. It’s not just about getting a sale, it’s about having customers that last long, that you can upsell, you can downsell.

And when you give discounts, those type of customers aren’t going to keep buying from you unless you keep offering more and more discounts.

It creates a bad habit.

So don’t just optimize for short-term income, optimize for long-term income by not giving a discount.

Optimize for your lifetime value of your customer.

► If you need help growing your business check out my ad agency Neil Patel Digital @ https://neilpateldigital.com/

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Why Offering Discounts Will Put You Out of Business

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28 Replies to “Why Offering Discounts Will Put You Out of Business”

  1. Neil Patel

    How many of you give discounts with your products, with your services, with your contracts, whatever it may be? If you do give discounts, leave a comment with "yes". If you don't give discounts, leave a comment with "no".

  2. MrZadeeh

    I defninetly dont agree with that. It totally depends in what market sector you are in. I work for a compny with 170 million turnover per year. They give discounts. Its their business model because they leverage. And you are just a youtuber, trying to convince something that appereantly didnt work for you! 😂 keep youtubing bro.

  3. VANITY Remodel

    In my construction business customers are the bad guys. I don't think I want to give anybody a discount. I don't know what's going on with me not making money, I think my analysis are saying that i need to not give discounts and only get customers that pay enough for me to provide services that will make me an income of 50k a year minimum and keep expenses and hiring subcontractors to a minimum because i dont want to have to raise my prices too much i dont want to rip people off either.

  4. shaharyar ahmed

    Well I think Neil! Discount should be personalised. Or you can make people feel you’re taking care of them like walmart have very good reputation on giving discount

  5. A.Celeste Glover

    I believe discounts cheapen the brand, unless it's for groceries, personal care products or similar items. I feel a little turned off when a small business has discounts because 1) I think "how can they afford to give discounts," and 2) "Why did they not give me that deal in the first place"?.

  6. Gerron Moore

    I'd always thought that offering discounts was the only way to get people to buy early on. Thanks for showing a different perspective, I'll definitely be changing some things up on my website!

  7. Sushiguide Lb

    Hello Neil, subscribed, do you think that bundles are also bad? For example if they buy 3 the price is 48$ instead of 50$? It encourages them to buy more and not a discount on a single product (similar to bundles like wactch + belt + shoes for x)

  8. David T

    Hi Neil, great video and advice! A question, I seem to lose alot of business because my prices are considered high but when I compare it, it's not that much and my products are of much better quality. What can I do? I don't want to drop the price yet I don't want to lose business.

  9. d mac

    What about referral discounts? for example, offer current clients a 15% discount on their monthly plan(only 1 month) for a referral sign up? @neil patel

  10. John Boyett

    You're absolutely right, discounts are a bad idea in almost all cases. I do have one small discount I offer customers that have 2 or more internet connections with my wisp business, but that's it. I currently have only one customer taking advantage of that. Everything else has no discounts whatsoever. There's a sign hanging on the wall in my shop that says "We have no quarrel with others who sell for less. They know what their stuff is worth."

  11. Michael B

    Thanks Neil. I love your energy.

    1. Are you primarily talking about services oriented businesses OR are you also referring to products such as apparel, or any other physical product?

    2. For startups, and generating what’s the alternative to discounts / sales?

    3. How about free giveaway offers to capture customer leads? I also giveaway apparel to social media influencers

    4. Free shipping offers – do you consider this a discount ?

    Thanks again Neil.

  12. Vivid Rose

    I have a beauty business, my lashes are 19.98 but I have different 20-35% coupon codes on social media. Like YT25, PIN25 so i'll know where the sale is coming from. I was thinking about doing a $5 sale for hitting 1k subs. You don't think I should do it? I haven't gotten a sale in months….like months 😞

  13. Amit Sharma

    Completely in agreement. Just need a small tip, what technique should be used to make user enter the email address on the pop up to give them product updates and building email list. As we say No to discounts, how can we attract them to provide email.

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