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The Deadly Dance of Discounting - 6/5/2012 -

Dropping your price to make a sale is almost never the right way to go.

By Scott Oser

If you are in sales of any kind, you know you have thought about—or actually offered—discounted rates to prospects, current clients, or both to get them to commit to purchasing whatever you are selling. In certain situations, reducing your association’s ad prices (discounting) is a smart strategy, but in general, dropping the price to save a sale is not the way to go.

Here are a number of reasons why:

1. Price impacts perceived value. If you are continually reducing your pricing and offering special discounts, advertisers—and potential advertisers—will not perceive the value of the advertising as highly as they would at full price.

2. Advertising is not a commodity. You want to form relationships with your association’s advertisers and sponsors. You want them to understand the value of advertising with you and therefore the value of reaching your unique audience. By selling primarily on price and wheeling and dealing every chance you get, you are not forming relationships—rather, you are turning your ads into a commodity. When purchasing a commodity, the buyer focuses only on price and not on value. Fighting with your competitors on price alone is not something you want to do.

3. Once you go down it is very, very difficult to go back up. Any time you reduce your price, you are putting a price stamp in that advertiser’s mind that is very hard to erase. In fact, once you drop the price, advertisers may even expect you to go lower,

4. Advertisers talk. Advertisers are often exhibitors and sponsors at industry events, and they do get to talking. Although it may seem strange, at some point those conversations could lead to how much they are paying for your advertising. If one company finds out that another is paying significantly less for the same space, you stir up trust and value issues.

5. Discounted pricing simply equals less revenue. Advertising revenue is typically required for your magazine and your organization to thrive. If you are doing a significant amount of discounting, you may impact your publication or your company.

As mentioned earlier, discounting is not always a bad thing to do, but if you are going to discount, you need to do it strategically. Some examples of strategic ways to use a discount include:

· Offering a one-time discount to first time advertisers.

· Offering a discount to category leaders who will hopefully bring in other companies in their category.

· Offering a discount to companies that have already purchased other things from your association (exhibit space, sponsorships, etc).

Remember to make sure that discount availability has a start- and an end-date so people respond quickly.

During your association career, there are going to be many, many times when you are seriously tempted to discount. As you can see from just some of the potential impacts listed here, the large majority of the time it is something you should avoid unless it is part of your overall sales strategy.

Scott D. Oser is president of Scott Oser Associates.


 

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