The topic of offering discounts to attract new customers consistently comes up, especially this time of year as we enter the holiday season. Whether you are a Gym, Studio, or Event Producer, it’s tempting to offer discounts to get new business to walk through the door, but what type of business does this attract? Does offering discounts lead to new long-term customers, or do discounts lead to single serving or drive-by customers? If you answered with long-term customers, please keep doing whatever you are doing. If you answered with drive-by customers or don’t know what the answer is, there are a few things to consider when offering discounts.
Are you equipped to handle a surge in business? Having a significant amount of additional business mean employees need to work more hours or more employees need to be hired. Are you able to accommodate either of these options? If the increase is temporary will you be able to scale back down after the surge?
Will you be able to convert these new customers to paying the full rate? If not, will these new customers be profitable for you or will they speed up the demise of your business? At the risk of stating the obvious, gaining additional customers that you are losing money on is not a healthy path for your business.
Will you offend any of you loyal long term customers by offering discounts to new customers or will you be able to handle offering the discount to everyone? Since gaining a customer is much more difficult and expensive than keeping a customer, you don’t want to do anything that will annoy your existing customers. Will offering a discount to new customers do that? Can you afford to allow existing customers to take advantage of a discounted offer?
Will offering a discount change the perception of your brand? Are you the premium price brand, like Apple, or the low cost leader, like Wal-Mart? Both have been very successful with their model and are among the most valuable companies in the world, but have very different identities. If you are the premium brand, will offering a discount reinforce or change the perception of your brand in a way you are comfortable with?