Small Business Owners – Where Does the Discounting Stop?
Discounts and online coupons seem to be all the rage these days with sites like Groupon and LivingSocial proving very popular with consumers.
There are many cautionary tales about companies offering massive discounts and then struggling to keep up with the huge numbers of orders they subsequently received.
These social coupon sites have always tended to offer business to consumer promotions but now there are business to business discount sites springing up – the question is where does the discounting stop and is it good for business?
Below are five disadvantages of heavy discounting for small business owners.
- You’ll attract one-time only customers
One of the main problems with heavy discounting is you’ll likely attract bargain hunters who have no brand loyalty. If you’re offering 70% off a first visit, how likely do you think these people will return and pay full price in the future?
For some types of businesses such as a wedding photographer, one-time clients might be fine, but for others like hairdressers or restaurants; it’s not the way to go.
- You run the risk of alienating your existing customers
Many of the social coupon promotions are aimed at bringing in new business. How would you feel if you were a loyal customer of 10 years and someone who has never used the same small business before suddenly got a huge discount you weren’t entitled to?
- Discounting can hit you hard in the pocket
A lot of small business owners get caught up in the hype of social coupons and offer discounts that don’t stack up. For example, a 70% discount may mean increased demand, which in turn requires more staff, result in reduced profit margins and little money (if any) left over once the coupon company has taken their commission.
- You may not be able to cope with demand