What discounts are bad news

Why are discounts disastrous and bonuses beneficial?

Giving a discount is a favor granted by you to the buyer. A bonus is something that has to be earned.

That is a huge difference.

Maintaining the buyer's trust
Once you cut your price, you psychologically set a new cost position in the buyer's mind. The next time they purchase from you the comparison price they have in their mind is the discounted one, not what they used to pay pre-discount.

A bonus has the opposite effect and can result in a classic "win-win". The buyer feels good about the sale, having won the bonus. From your perspective as seller, at least you've maintained your overall revenue, although maybe your profit margin has suffered a bit, as you've had to fund supplying the bonus too, whatever it was.

Once you start "fiddling" with your prices you loose the trust of the buyer. They don't know whether to purchase from you now, or hang on for another few weeks in case you discount by another 10%. Since it's easier to go with the status quo, as opposed to positively taking action, in this case the buyer simply defers the buying decision.

Nowhere is this more evident that in the PC market. We all know that the price of PC's is going to go down, so what's the incentive to buy now? Answer: there isn't one. I'd love a smart, new, small-screen net-book, but I know if I hang on I'll get greater choice at a cheaper price. Technology has become one of those purchases that you only make when you absolutely need to. The manufacturers know this and respond with two actions:

1) They try and convince us that we need a whole pile of new features that we actually don't need.

2) They load up their offer with additional bonuses.

The first is "feature selling" and is largely used to distinguish their offering from others in a crowded market. The second response is classic bonus selling - mostly software and maintenance contacts, which are actually quite cheap to offer from a manufacturer's perspective.

Whenever possible, sell with a bonus that benefits your buyer and doesn't cost you an arm and a leg, rather than accepting a discount that immediately hits your top line.

Children rule the world
Well, I know they don't exactly, but they do wield tremendous influence via their parents - whom they test continuously with the question, "Why Mummy?", "Why Daddy?"

The reality is that children learn precisely because they are always asking questions. Why this, how that, where is it, who did it, what can I?

Adults learn to NOT ask too many questions - and therein lies the problem:

By suppressing your inbuilt curiosity, you also suppress your creativity.

Try this exercise.

Next time you walk along a street, look in the shop windows with a specific question in your mind: "Why did they do that?"

And then really worry about the answer - see where your thought process leads.

When you're done with shops, move on to newspaper ads.

"Why did they do that?" "How is this supposed to make me feel?" "What would I have done to make that better?" "Who are they directing this message to?"

When the questioning habit gets fixed in your brain, along with it will come a massive boost in your creativity, general problem-solving abilities and love of life.

The world is a pretty spectacular place when you learn to see it in the full colour revealed by endless questions.

That's it folks for this week - as usual, your comments welcomed and appreciated, particularly with reference as to what you'd like to hear about. I do get quite a few e-mails by the way, and I read them all, so please don't feel shy about getting in contact.

Best wishes for the coming week.

Chris Davidson
Editor, Professional Speakers Journal
editor@professionalspeakersjournal.com