There is nothing more dangerous than a poorly conceived discount strategy. Every week, I see organizations offer discounts that might provide a short-term boost in sales, but will hurt them in the long run.
The origins of these discounts are easy to understand. An event is under-performing so someone within the organization suggests, “Let’s offer a discount!”
The problem with that scenario is that you’re assuming that customers aren’t buying based on a price objection when, in fact, it’s much more likely that they aren’t buying for other reasons.
When used improperly, discounts can cannibalize your full-priced sales and negatively affect your ability to sell at full price in the future. But when done correctly, discounts can be a great tool to motivate a buyer.
The Four Non-Negotiable Rules of Discounting
- Discounts must be offered to a select segment of your audience.
- You must inform the audience member that they are part of that select group.
- Discounts must be offered when customers are least likely to purchase, or must otherwise encourage a specific purchasing behavior.
- Discounts must be time-sensitive.
Offering a discount to your entire audience—or a giant segment of your audience—isn’t a discount at all. It’s a change in price. And once you’ve told your entire audience you’ve changed your price, going back to your regular price will be viewed as a price increase. “Going wide” with a discount—to your entire email list or your entire Facebook audience—can have catastrophic results. You’ve told your entire audience that your product or event isn’t worth the price you’ve set. And you’ve announced a discount culture to your universe, and conditioned them to be less likely to buy at full price in the future.
Instead, offer a discount to a narrowly defined segment of your constituents:
- Customers who bought X
- Customers who haven’t purchased in 6 months
- Customers who follow you on a secondary social media platform
Secondly, explicitly identify your customer as part of that select audience in the offer:
- Because you attended X, here’s a special offer just for you…
- We haven’t seen you for a while, here’s an offer to entice you back…
- 25% off for our friends on Instagram…
By keeping the audience for a discount offer narrowly defined, the customer knows why she is getting the offer. It’s not desperation on the part of the seller—it’s a reward or incentive based on the behavior of the buyer.
After considering the audience, the timing of the offer is the next most important factor. People are more likely to purchase an event ticket as the event nears. In fact, purchasing behavior has drastically changed in the last ten years—customers are buying event tickets later and later in the sales cycle.
Many arts organizations panic when an event nears and sales are low. Often, they offer a knee-jerk “fire sale” discount at the last minute:
“$10 off all seats to tonight’s performance with discount code THRIFTY!”
Discounts of this type can be disastrous. Consumers are smart. They can tell when a presenting organization is desperate. Furthermore, you’ve just offered a discount to your audience at the time when they are most likely to purchase anyway. It’s the equivalent of a restaurant offering a discount only to those dining Saturday night at 7:00 p.m.
Instead, offer discounts when customers are the least likely to purchase—far in advance of the event.
Think of a discount as driving an unlikely purchasing behavior. Often, a discount is designed to motivate an early purchase, but other behaviors can be encouraged:
- Buy two and save…
- Invite a friend and save…
- Subscribe to multiple events and save…
Finally, all discounts must have a sense of urgency. You must include a deadline to encourage a buyer’s immediate action.
If you follow these rules, you can use discounts to motivate price-conscious buyers, without damaging your brand or cannibalizing full-priced sales.
Have a creative discount success story? Share it with us!