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Dangers of Discounting in Your Business

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Dangers of Discounting in Your Business

What I want to focus on in this business tip is something that I know every business owner can use.  We're going to be looking at pricing and more specifically to the discounting that a lot of us do.

I'm going to say this bluntly, if you live by the price, you are going to die by the price. It's as simple as that. If the only differentiator that your business has in the market is that you're the cheapest, your business is going to struggle.

We can look at companies like Walmart and Costco which are businesses that really sell on super low prices.  You have to understand, that their business model is based on this, and it's not the same as yours. Walmart has efficiency set up all throughout their business and they are famous for their ordering and automated supply-chain management system. Costco is a membership type business model where their membership is driving revenue into the business as well.

Remember that discounting and low prices are going to kill any business in the long term, it just does. To be blunt, what I am really saying is, I don't want you discount anymore. It's as simple as that, don't discount again.

I am stressing this first and foremost because when you discount, it brings you your customers that are alike, your C and your D customers. These are customers that are focused on price.

I would like to share with you some of the dangers of discounting. Let’s take a look here at this chart that I have and up across the top. 

If you take a look at along this horizontal line up here is our margin.  If we have margins at 40% and we want to discount our prices by 10%.

If you look in the middle of the chart where it crosses, it shows that we have to sell 33% more to just be at the same level of profitability, and the same margins.

That sounds a lot like working harder, not smarter. Right?

Think about how much harder you have to work when you are discounting? Let us simply flip the switch.

What would happen if we instead of discounting our prices by 10%, we increase our prices by 10%.  Now when you look at the chart, it's showing us that we can actually sell 20 percent less than what we did prior, and with just a 10% price increase we can be at the same margins.

That is a pretty crazy thing if you sit down and you think about it, right?  That is really the definition of working smarter not harder.

So stop discounting and you'll be able to really start working your way towards building a business, by working smarter, not harder.

Please go ahead and really start utilizing this strategy right now.

If this resonates with you, book a free strategy session so we can discuss how you can apply this to your business and discover the power of coaching.

Learn how a business coach can help you avoid the dangers of discounting

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