Wednesday, 12 February 2014

One Mistake You Don't Know You're Making






Let's face it, there are many mistakes you can make in business. Big ones, tiny ones, even unnoticeable ones. There are even some specific mistakes you can make in your handmade business.

But I bet you couldn't tell me the one mistake that just about everyone does make?

And, I would wager that you don't even realise it's a mistake!

Discounting

Yep, you read that right. Reducing the price of your product and having a sale.

Let's backtrack just a little here.  The hardest customer to secure in sales is the new lead. The brand new person full of objections that need to be overcome before converting to a customer. Throughout my sales positions over the years the one thing I always strived for was repeat business and referrals. I learnt it was harder to convert new customers than it was to service existing ones. When it came to having sales and specials, I always opted for the "gift with purchase" over discounts and coupons. I don't know why really, it was just something that made sense to me. It was further reinforced in my banking years as I wasn't high enough on the food chain to actually give any sort of discounts.

When selling I didn't look for or even offer deals for my customers, I always looked for ways to add value. When I was selling cosmetics that would mean I would provide the make up brushes free (added value), in banking I would be offering the fee free credit card and offset account with the mortgage (again, added value).

Adding value to what you are providing your customers does just that, it ADDS VALUE. When you discount, when you have specials, you are doing the opposite, you are reducing the value of your product in the eyes of your customer. 


Discounting devalues your product.

Consider this, does a customer who only purchases from you when you are having a sale really appreciate the true value of your product? 

I know what you're thinking. How can I promote my business and not have a sale?

My first suggestion for you is to consider ways that you can add value to your product. Now everyone's business is unique to them and your customers are also unique to you. Your relationship with them goes a long way towards what is and isn't acceptable when it comes to the types of promotions you offer. However, think laterally for a moment and perhaps consider that it might just be your customers that have trained you into having discounted sales on a regular basis. Is there something that you can include with the product that will heighten the customer experience and solidify your relationship with them? If you make dresses, perhaps a simple pair of bloomers to go underneath the dress? Matching tops to skirts/shorts for free? Anything really. This, gift with purchase, allows customers to have a real appreciation of the value of your work (they pay full price) but also get what they feel is value for their money.

So what if you have stock that you just want to move? Perhaps try to think creatively about ways you can help move your old stock and not reduce the value in your customers eyes. Perhaps you have a sale but it's a private sale, only open to previous customers? You know they value your work, you know they are willing to pay full price, host a private sale and reward them for their loyalty. 

Another way you can add value is through multiple purchases, the big brands do it all the time. Buy 2 full priced items and get the third free! You may think that giving something away actually encourages your customers to reduce the value of your product but it doesn't. Getting a free gift doesn't mean they will hold a lower value to it.

A further extension to the above gift with purchase is bundling, perhaps create a limited edition line that is only available with the purchase of select items? How many times did I buy $60 worth of skin care just to get the free gift of make up?? You know what I'm talking about!


I'm not saying that you can never have another sale again in your business, what I am trying to get you to consider is if you become predictable in your sales your customers will know that if they just wait they can buy it on sale. Not only that, if you regularly discount your prices, your customers will no longer be willing to pay what you have as your regular full price.

Other articles discussing pricing,

Handmade Pricing: How To Respond When Told You Charge Too Much



While conducting research for this article I came across this YouTube video. While I am not advocating no sales ever again, I think that Derek is making a very valid point. Stick with it, watch it to the end, push your perceptions and tell me, how are you creatively going to have a special promotion without devaluing your products in the eyes of your customers?




Another article discussing different strategies to discounting from Jamie Stenhouse.

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