Ecommerce and Retail

Does Discounting Devalue a Brand More than Free?

We were having a good discussion about my upcoming presentation at Social Media Marketing World about what kind of offer we could make to folks that attended my session or the event as a whole. The conversation came up with whether or not any discount or free option might devalue the work we would provide.

One of the lessons I’ve learned is that once a price is set, the value is set. It doesn’t typically matter what type of results we’re getting our clients, they almost always return to what we do and what they’re paying us to do in comparison to other vendors. So – if we provide a discount to a client for the first project we provide, we’ve never seen them opt into a second project for the full price. It’s our fault… we devalued our work by discounting the up front engagement.

Deep discounts devalue a product or service, limiting companies’ ability to raise prices. Rafi Mohammed, HBR Ditch the Discounts.

A few weeks ago, I was discussing this with my friend James who owns an Indianapolis pizzeria. He’s told me that he’d rather give away than to discount. People that sample the free food recognize the value of the food whereas those who came in off of a coupon offer just come for the deal – not the quality of the food. The coupons devalue the product and service so James stopped doing them.

Since consumers believe the value of a free product is likely to be consistent with the value of the purchased product, pairing a free product with a high-end product may very well increase perceptions of its value. Mauricio M. Palmeira (Monash University) and Joydeep Srivastava (University of Maryland) via When Do Consumers Think a Freebie Is More Valuable than a Discounted Product?

This is why free shipping is so popular with ecommmerce sites. Rather than devaluing the product that you’re selling, you’re offering something in addition – a simple concept for consumers to understand without devaluing the product or service.

Our results are anecdotal, of course. We know that when we negotiate our engagements we must walk away rather than discounting. Or we can determine if there’s some additional product or service we can afford to add. For example, our clients get a weekly and monthly Google Analytics report that puts GA into a very nice, readable report that’s fantastic for an executive overview. While we pay for the service, it’s a value add that we’d gladly give away as long as we’re paid in full for the services we provide.

For marketing technology companies, I’d recommend a free trial over a discount any day. Let the customer test drive your platform and see the value for themselves – and then they’ll gladly pay for the service.

Do you discount? Are you seeing different results?

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