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Stop Discounting, start Bundling

Business Solutions

Discounting has long-term negative implications on the way your clients perceive the value of your products. Rather than discounting try Bundling. 

 

Bundling is the process of grouping together certain products to create packages that are then sold to clients. When you do this, you remove price from the equation by creating an “apples to oranges” comparison. You must remember clients today shop value – NOT PRICE!  

 

The key to success in marketing is to offer more value than your competition. Prospects will pay twice the price if they believe they’re receiving four times more value. Unfortunately, most businesses in a vain attempt to increase their value begin to offer discounts, and that often destroys their margins. Did you know if some businesses discount their price by a mere 10%, they now have to sell 50% more just to break even? 

 

For example, if you sell a chair for $100, and you have a 30% profit margin, you make $30 for every chair you sell. That means your cost for that chair is $70. If you discount that chair 10% and sell it for $90 instead of $100, your cost is still $70. Now you’re only making $20 in profit instead of $30. 

For this business to make $1000 in profit selling their chairs at $100 each, they would need to sell 33.3 chairs ($30 X 33.3 widgets = $1000). But by discounting their price 10%, now they need to sell 50 chairs ($20 X 50 widgets = $1000). They now have to sell 50% more chairs just to get back to their original profit margin. (33.3 X 1.5 = 50). 

But consider this… when was the last time you saw a business offer a measly 10% discount? Most of the time they offer 20% to 40% discounts and are confused why they are going broke.  To top it off, did you know the latest research shows discounting does not actually impact a prospect’s buying decision unless that discount is for 40% or more? 

 

STOP discounting!!! Instead, innovate your business so you offer more value than your competition… even if that means increasing your price. When you discount your price, you lose the full value of every dollar you discount. Bundling increases the perceived value, so prospects buy more. 

Sit down and create a list of all the potential products and services you could bundle for YOUR business. This strategy can add substantial revenue to YOUR business. For the purposes of staying conservative in our estimates, let us do this. Bundling can easily increase any business’s revenue by 25% to 40%. Could we conservatively say you could easily expect to see a minor 10% revenue increase in your first year using this strategy?  

So, what does that translate to based on your current annual revenue? 

 

Written by 

  

Michael Clift 

Founder|Business Coach 

Venture Cultivation Coaching