How to Offer a Discount without Devaluing your Products
As a business owner, giving people a discount seems like a good way to convince them to buy our products and services. We think (or hope) that potential customers will feel better off and more satisfied if we give them money off their purchase.
And that’s a good thing… isn’t it?
It’s true that offering discounts might encourage more people to buy what you’re selling.
However, in some cases, it can have a negative effect.
This post was originally a video - watch it below if you prefer that to reading!
How “early bird” or time-bound discounts can hurt your sales
When it comes to giving discounts on digital products, there are a few things to think about. This applies to courses, ebooks, memberships, or even coaching packages or services.
You may be thinking about giving your clients 50% off on your course if they sign up before a certain date.
This is a perfect example of an early bird discount and may seem like a great idea. Other businesses do this, so it must work, right? Well, yes it can, but...there are some possible disadvantages to this strategy that you need to consider.
People may see your product or service as less valuable
Although it makes sense in our minds that having a deadline for a half-off sale will encourage more purchases, there is one crucial factor you need to remember: a huge discount can undermine the true value of your product.
Instead of your customers being happy that they’re getting a high-value product at a lower price, they’ll actually end up valuing the product at that lower price.
Let’s say you have a $500 course, and you announce that if you buy before a certain date, you’ll receive the course for $250. That’s a huge 50% off your actual price.
But by doing this, people will perceive your course as being worth $250. That’s just how the human brain works. Because honestly, why would anyone sell something at $250 when its true value is $500?
2. People are less willing to buy once the discount has ended
If people miss the deadline for the early bird discount, there’s a good chance they won’t sign up to your course or buy your eBook anyway.
If you didn’t spot the email announcing the price increase, or if you were distracted and ended up missing the deadline, would you still sign up or buy?
More than likely not. It’s money down the drain. And that’s how your customers see it too.
3. If people do decide to pay the extra price, satisfaction rates are lower
If your customer wants the product or package, even after the offer has expired, that means they end up buying at the higher price. In many cases, this will lead to lower customer satisfaction.
They end up feeling like they paid too much.
They had a chance to pay a “good price”, and they ended up paying more.
There’s a little bitterness, a hint of dissatisfaction, and maybe even some regret.
They went ahead and bought your product at the higher price, but in their minds, they’re still valuing it at the lower rate.
Why offering a bonus instead of a discount works better
Instead of giving people a discount when they sign up or buy your product, you could set a fixed price (the price you really want them to value your product at) - and add something extra if they purchase before a specific date, through a particular channel, or perhaps for repeat clients of yours.
You can offer pretty much anything as a bonus.
Your bonus can be something pre-existing that won’t cost you any extra time to create (like an ebook, another online course or a physical product). Or perhaps something extra you can do for them (group coaching, a one-on-one-session, a “hot seat” or more personalised support).
What you offer depends on what the main product is.
By offering a bonus, people will feel the satisfaction of getting something extra for their money, which is more effective than simply giving a discount.
When the rules of not giving huge discounts don’t apply
There are of course instances when you can give a discount without it hurting the value and reputation of your product.
1. Offering a discount on a “beta test”
When you’re first launching a product, you might want to launch it as a “beta test” first. You know the value is higher than the amount you’re setting the price at, but you want to test it out with real clients and get some feedback to improve it.
This is when you’re likely to get more people signing up. You get all that value but at a lower price - and they realise the reason they’re getting the discount is not that the product is worth less - but that they’ll have to give you something in return (feedback) as well.
Once you fix all the bugs and sell the better version later, your customers won’t mind paying the higher price to have the complete finished product. (Although it’s often a nice touch to let your beta testers get access to the finished product without having to pay the difference!)
2. Giving a discounted rate when you’re “bundling”
Another time that giving a discount is not a bad idea is when you’re creating package deals, or “bundling” things together.
Let’s say you have a course and an eBook that complement each other nicely.
Your course is $195 and your eBook is $20, but you sell them together for $200.
Your clients will feel more satisfaction, and that they’re getting a bit of extra value for their money. So bundling different products together and giving a discount on them makes sense.
And if people really just want to buy one of the products, they will accept that it’s more expensive to buy them separately.
What do you think about giving discounts?
Are you giving discounts, offering bonuses, bundling products or doing anything else to entice people to sign up or buy your products?
How is it working for you?
Let me know in the comments below!