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Should you offer discounts and freebies?

Do you discount in your business? Do you believe in giving your products or services away for free?

One school of thought says that freebies and discounts:

  • Devalue or cheapen your services
  • Attract freeloaders and tire-kickers
  • Reduce your profit
  • Make it difficult to charge full-price.

Fair enough. But is this always the case?

Let’s start by looking at some of the reasons a business might offer something for free (or heavily discounted):

  1. Clear stock
  2. Create opportunities for you to develop a portfolio of work or test a new product/service
  3. Get new customers by giving them a taste of what you offer
  4. You are not confident in the value of your products/services.

Now let’s look at ways to address these challenges that may or may not involve discounts and freebies:

  1. If it is that you need to clear stock, there are most often better ways to do so than discounting or giving freebies. You are a small business – it’s ok to be a little creative! Also, why do you need to clear stock in the first place? May I suggest that you have a serious chat with a friendly accountant about how to order the right amount of the right products?
  2. If you do not yet have any testimonials, case studies or examples of your work, you are right to look for ways to get this experience and proof of your value. However, the way to do that is not to give your product/services away for free.
  3. There are many ways to get new customers by giving them a taste of what you offer. You don’t need to be limited to giving things away for free though. See below for more.
  4. Do you constantly worry about asking people to pay your rates or set prices, fearing that they are too expensive? Provided you have chosen your prices using careful research, calculating and assessment, you need to be confident in the value that you provide.  People won’t purchase your products/services if they aren’t sure it will do the job well and if you don’t exude confidence and ability.

If you are thinking of offering discounts or freebies, make sure you consider the following:

Sampling, trials or free services

Never give your core product/service away for free. Never, ever. Never! Do not offer a free version of what you sell. Instead, offer a sample size or trial – never the full version that you would normally charge for. Instead of giving free consulting or advice, offer a complimentary evaluation, a short discussion or a Q&A.

The key is to not give them what you would normally charge money for. Instead, identify their needs; give them something to get them interested and to show them what you can do – not to actually do it for them. Show them 60-80% of your solution, but do not give it to them. That is what you need to then sell them. If done well, this can actually be a great sales strategy.

Value add VS discounts

Ask yourself, would it be just as effective – if not more effective – to offer a value-add or extra add-on to your business offering instead of reducing the cost? Most of the time it is, and it avoids devaluing your work or making you look desperate.

Daily deals and group buying sites

If you are thinking of offering your product/service on daily deals and group buying sites, you should take a look at this article first: The deal on discounts.

Creating the perception of having lots of clients

If you want to appear to have lots of customers you may think that offering your services/products for free is the way to go. For example, a new retailer would benefit from having a busy shop/restaurant as it increases the perceived demand and popularity of their offering. Some retailers invite friends and family to fill seats, eat out, ‘buy’ products or ‘window shop’. This can also be used to highlight any gaps or flaws without losing new customers.

However, this does not need to be for free. In fact, you are crazy to give away the very things that you make money from. Talk to a good marketing consultant about some of the other ways that you can do this without ripping yourself off.

Filter out the tire-kickers so you are left with ideal customers

Often the people who are looking for free or discounted products/services are not the ideal client to go after. You want clients that understand the value of what you offer. With the right marketing and PR, your ideal client should feel they are getting high-value, and even more than they pay for. See: Keeping your existing customers engaged and delighted.

Qualify your prospects first by giving them something that they must do first in order to receive your special offer. Again, do not give away what you would normally charge for. Do not discount what you offer unless it is in the interests of a long-term business arrangement. Even then – in most cases you should still not discount.

I am assuming you started your businesses because you are very good at something. You can do something in a way that no one else can and you have skills that I certainly don’t have. That is worth paying for if you are targeting the right people with the right marketing.

Look at the differences your products/services have made in the past and see the value of your business offering. Do not downgrade the quality of your work and do not rob yourself of the money that your skills deserve.

Phoebe Netto

Phoebe Netto

Phoebe Netto is the Managing Director of Good Business Consulting, a business advisory specialising in marketing and public relations (PR) for small-to-medium sized businesses. Phoebe has lead PR and marketing programs for a diverse range of clients, from listed Australian companies, global brands, not-for-profits through to sole operators. She now takes these skills that are often reserved for big businesses, and uses them to help good small businesses grow and meet their objectives by retaining their customers and attracting new ones. Follow Phoebe on twitter for PR, marketing and small business advice, plus a little nonsense! @Phoebe_Netto

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