Offering Discounts and How It Affects Our Business

[quiverfull7]

on another thread there was a question about offering discounts and I remembered this article from awhile back. It's well worth reading...

Subject: Discounting…yes or no?

Tonight's dinner table discussion was an interesting one. Two of my children work at the same neighborhood coffee shop. The coffee shop had a recent change of owners at the beginning of the year. The new and current owner - we'll call him Sam - is in a bit of a dilemma. After owning the shop for nearly eight months now - he is hard pressed to realize a profit. Of course there is the normal three to five year `curve' that applies to any new business, except, that this business has been open - with a very established customer base - for over six years.

So…what's the problem, you may ask.

As in most businesses, there are a variety of contributing factors - including too many Starbuck's within close proximity. However, a HUGE issue is the practice of discounting for `favorite' customers, established by the previous owner. Sam is now trying to do damage control in order to begin to realize some profit without offending the regular customers. It is a tricky situation to be sure.

I share this story today as food for thought for you and your business. Certainly there may be times when you run special sales for your customers. I would caution the practice of discounting too regularly.

Getting into the habit of discounting does several things:

Your customers will begin to balk when you charge full price and only want to buy when they receive a discount.

It devalues your product line.

As in the case of Sam - it is difficult to reverse once started.

MOST IMPORTANTLY - your business is far less profitable when you discount.

As women, sometimes we have difficulty being paid what we are worth. Some of us feel guilty for taking money and therefore “giving a deal” seems like the right thing to do. Men don't do this. Somehow, they are wired differently - I'm convinced of this. Men don't apologize for things they didn't do (ever notice how often women say I'm sorry for something that they had no part in?). Men don't feel bad about or make excuses for money they are paid for a job done; whether in the form of commissions for sales or fees charged if they are a doctor, lawyer, accountant, etc;. The `why's' behind this phenomenon is the stuff self-help books are written about and not the subject of today's tip.

Just remember - you are in business to make money. If you are not in business to make money - then you probably will find yourself with an expensive hobby. Hobbies cost money - businesses make money…period.

 

[cmdtrgd]

This is why I never have an annual sale. I do send out magnetic calendars with my info on them around Thanksgiving. In the envelope can be some sort of discount card. This year it is 20% off an order of $50 or more before December 31st.

 

[urbnk8]

Thank you for this! Very good point and a good reminder!

 

[Kitchen Diva]

Did you get that from The Success Factory? They have such helpful tidbits, don't they?
I try really hard not to give discounts, but one two occassions I have, and it yielded great results. I agree with what you posted and I agree that this could become a very expensive hobby if you didn't have some sort of checks and balances on your discounting...
Thanks for sharing!

 

[chefann]

Thanks for the reminder, Diane.

When I do offer discounts or freebies, I try to state that it's a special thing because I'm trying to reach a goal (they don't need to know that it's a goal to stay active...). That phrasing is usually enough to let people know that it's not a usual thing. And we get such great specials through HO that we don't have to pay for that all we really need to do is emphasize those.

 

[RebelChef]

Diane, that example could be the capuccino cafe I managed a few years ago. The owner's wife spent tons of money on useless things that wouldn't sell (other places had the same items for less) then didn't know why there was no profit.

Thanks for posting this. I had a lady email me recently about an order and ask about a discount. I told her I don't do them but if I decided to in the future I'd let her know. I haven't heard from her since. Why would someone expect a discount when they know this is our job? I realize some do give them but that's their choice and it shouldn't be expected. Just appreciated when it does happen. I'm glad to see in writing that I'm not just cold about it. lol

 

[Cookin' Mama]

Thanks Diane, you helped me see that I shouldn't do what I thought was good for my business. I think in the long run it would be awful!!!!!

 

[floccies]

Pampered Chef host benefits are great and we don't need to add anything else.

I had someone host a catalog show that did not "make" ($108). SHE decided I should add it to another show. A week later she asked if she got a discount if she ordered -- I offered her 10% off her order and never heard back from her. I wondered if I offered her enough -- but the logical part of me spoke lounder that for just a tiny bit more effort she would have a real show.

I give my hosts a Seasons Best which the guests sign -- I also have my contact info on the inside. I also have small door prize items that I draw a name for at the end. (nothing over $5). Alot of people in my cluster offer free shipping with an order over $100 -- I haven't tried that yet.

 

[raebates]

On rare occasions I'll offer a special discount. Like others have mentioned, I always make sure it's understood that it's not the norm.I do offer incentives--extras that I throw in for a show of a certain sales level, for example. That's a bit different, though.

 

[JAE]

I don't give away much and I don't do discounts. I decided not to offer free things to hosts who have a certain show level because they would get even more free for their hard work at no cost to me. I did discounts in July because I wanted a second show for the free thing (not sure what that was). I was offereing a free Mini Serving Spatula for giving me 40 names with addresses on the invite list, but only 1 person has taken me up on it. She had one of my lowest shows ever, and she barely earned more than the spatula!
I gave lots of free things away at my fall preview show because I had it and wanted to get rid of it. So far so good without offering extras. PC has a great host plan.

 

[pcrae]

Thanks for posting this. I had a lady email me recently about an order and ask about a discount. I told her I don't do them but if I decided to in the future I'd let her know. I haven't heard from her since. Why would someone expect a discount when they know this is our job? I realize some do give them but that's their choice and it shouldn't be expected. Just appreciated when it does happen. I'm glad to see in writing that I'm not just cold about it. lol

My answer would be, "of course I offer a discount! For hosting a show with just $150 in sales, you will received a 15% discount. The discount gets even larger as the show sales increase!"

OR... "Please let me know what you are interested in. Many things are offered at a discount at various times during the year. I would be happy to keep your wish list on file and call you when one of your items goes on sale."

Just some thoughts. (Keep in mind I am new at this and am bouncing my ideas off everyone in hopes to improve my communication with my customers!)

 

[ragschef]

Another thing to beware of is placing orders with "good friends" and not having payment for it. Because they're a good friend, you tend to trust that you'll get paid, but you'd be surprised how many people have been burnt by this very same situation, including myself. (And to make things worse, it was my sister who never paid until a month after having her stuff!!)

I dont do discounts to anyone without a PHD or hosting a current show. There is absolutely no profit in it!

Best of luck to everyone!!

 

[kspry]

Of course there is the normal three to five year `curve' that applies to any new business

Sorry to say, I'm one of those jackasses that is giving out free stuff to grow my business.
edit - the cake tasters were a big hit at my last show!

I look at this PC thing, long-term. I work full time, and I might switch to PC full time later down the road, but right now, I'm in it for the fun of meeting people and getting discounted product.

I've dumped a lot of money into give-aways this past year, which I expect to pay off later....much later.

too many Starbuck's within close proximity

As with any franchise-type or MLM situation, PC consultants may find themselves in conflict with other people's decisions.

 

[RebelChef]

My answer would be, "of course I offer a discount! For hosting a show with just $150 in sales, you will received a 15% discount. The discount gets even larger as the show sales increase!"

That's the thing. She only wanted to place an order for herself and possibly add a couple of things for her mom. She was close to $100 on her order alone but didn't want to do a show. She had originally said she wanted to order it within a couple of weeks then before I even told her no discount, she changed it to Jan or Feb. Go figure.

 

[Intrepid_Chef]

Thanks for the swift kick in the head, namesake!

I read this as I am already preparing to do things I never said I would do ... "bail out a party" with $36 in orders rather than submit $110 in individual orders just because Past Host can't get the promised discount on the cookie press if I don't. Of course I'm being "smart" about it by getting things I wanted anyway ... and things on special ... and making pretty much everything I spend in the form of commission ...but still ... I did that enough times with Previous Product Line and would not do it again if it weren't so close to Christmas.

The whole point of my "how do you do it" thread was me wondering how anybody makes any money by offering, say, a 20 percent discount for Black Friday. I came away from that discussion determined not to offer any discounts other than what the company offers.

 

[RebelChef]

Unless I've missed something, I can't see how you would. You would develop a customer base but if you're giving the same discount as your commission rate, there's no gain. If you're at a higher commission, you'd get a little but by the time you figure in gas, supplies, etc., you still don't come out ahead.

I agree that the company gives good enough incentives and bonuses that the consultants shouldn't have to give discounts unless it's just something they want to do. But for people to expect it and get upset or refuse to order when they don't get it is just wrong. I got in this business because I love the products and to earn money, not to give away what I make. I don't know anyone else in another profession who would do that. Besides hubby would use my 5" utility knife on me and hide the pieces in little boxes. lol

 

[pamperedgirl3]

I think the Black Friday sale was to get sales for the free spring products. I didn't do one because I don't offer sales or discounts either.

 

[cmdtrgd]

I will offer sales, but I let my customers know that it is for a sales goal or an incentive and that they are helping me. For Pan-o-rama I offered 10% of the purchase price of open stock items towards more products and 20% for sets. This encouraged them, I received MORE sales and I did give away some of my profits, but it was worth it to me to get more sales and points. I never have a "every x month I do a sale" promo. It is sporadic and nobody knows when it will happen. That is key to keep people from waiting to give me their orders until my Christmas in July (or whatever) sale. And, I don't promote it until a few days before it happens, or even the day it starts.

 

[wadesgirl]

Sorry to say, I'm one of those jackasses that is giving out free stuff to grow my business.
edit - the cake tasters were a big hit at my last show!

I look at this PC thing, long-term. I work full time, and I might switch to PC full time later down the road, but right now, I'm in it for the fun of meeting people and getting discounted product.

I've dumped a lot of money into give-aways this past year, which I expect to pay off later....much later.

Guess we are the only ones who like to give stuff away. I like to give out door prizes at my shows, offer incentives to help bookings, etc. That's what I love about this business, you can run it how ever you want to. So there is no right way or wrong way!

 

[cmdtrgd]

I always give away small stuff at my shows - it makes them fun. I was talking about 20% off sales, Christmas in July, Black Friday, anything that is annual that people know about and will WAIT to order. Giving out door prizes is part of the show for most people. Think about the numbers...3 door prizes = @$3. 20% off all orders in July can = $100s of dollars as well as lost orders when people hold on to them. That is what this thread is about.

 

[wadesgirl]

I always give away small stuff at my shows - it makes them fun. I was talking about 20% off sales, Christmas in July, Black Friday, anything that is annual that people know about and will WAIT to order. Giving out door prizes is part of the show for most people. Think about the numbers...3 door prizes = @$3. 20% off all orders in July can = $100s of dollars as well as lost orders when people hold on to them. That is what this thread is about.

I wasn't saying that. I do give away more than just door prizes though, I just like that aspect of this job. I gave away a free small round stone at a booth I did and to hear the excitment in the lady's voice when I called her was great. I also did a "12 days of January" special and giving them a large bar pan for the price of the day they booked. I booked three shows that way. Stuff like that is fun to me.

 

[cmdtrgd]

I do that stuff, too. I just make sure not to do the same thing at the same time of year so people don't expect it. When they start expecting a discount, that is when you lose out.

 

[cmdtrgd]

Oh, and I did the Trifle Bowl for the price of the day for early in the month bookings this month.