In all of manager-dom, there’s nothing as frustrating as someone discounting needlessly. It happens in several forms: making up for a mistake in the shop and missing a promised time for completion to name just a couple. By far, the worst is discounting a product or service because the customer thinks it’s not worth the money.

A Restaurant Example

Think about your favorite steakhouse for a second. You adore their bacon-wrapped sirloin and gladly pay the $39 a la carte whenever you go. A twice-baked potato and haricots verts pair nicely with it, as does a Chardonnay .

One day, you visit Chez Steakhouse and see a sign out front for half off the bacon-wrapped sirloin, and a free side to go with it. Your steakhouse is offering discounted pricing AND combo pricing. Suddenly, it’s almost the same as a supersized Double Whopper meal at Burger King. You almost order two, then settle on just one.

Eventually, Chez Steakhouse no longer offers their combo pricing. But do you go back for your favorite steak dinner? You might, but you no longer perceive the same value. What was once worth $39 in your eyes is now just a $20 steak. A discount has marred your perception.

Why It Matters

How is it that an item can be worth $20 one day and $39 the next? Its purpose was likely to increase sales, be a loss leader, and drive traffic from new customers. Unfortunately, it came at a great cost as value – the benefit of the product compared to its price – has been cut in half.

The same goes for discounts in your service department, parts department, and even on the sales floor. Granted, someone would be fired if a car was sold at half the MSRP, but discounting is a flawed method of making valuable sales. When a discount is applied, your customer no longer sees the product for what its original selling price is; its perceived value will never be more than the discounted price you once offered.

How Do You Deal with Discounts Then?

The approach to eliminate discounts and sales depends on the reason for the discount. These are not gospel, but rather solid ideas for keeping the perceived value in your product.

• Discounts due to your staff’s shortcomings can instead be offered loyalty dollars. We’ve all been there when mistakes are made and there’s no way around it except compensation. Instead of doing line discounts on the invoice itself, give the customer a loyalty card or points card that can be applied to the bottom line on immediate bill. In that way, the invoice lines never reflect a cost lower than your original price.
• Discounts due to poor selling should be eliminated altogether. A salesperson or advisor who is unable to communicate the value in a product needs additional training. Properly sold to the customer, there should be no question of its benefit or value. If the customer still refuses, let the sale pass by instead of dropping your pants on the price.
• Discounts as advertising techniques should be avoided completely. Leave the low prices to the corner stores and quick-lube shops. If you’re trying to undercut the low-ballers, you’ll bring in the gritty, hard-to-sell customers that frustrate your staff and only buy your loss leader. Instead, advertise your expertise, your professional service, your factory-trained staff. What you offer is worth more than the other guys.

The benefits are clear: higher gross profit, more total sales, satisfied staff and increased customer satisfaction in the long term.

Whenever you discount a service or product, you’re telling the customer it’s not worth its original price. And when you can sell at full price, you’ll enjoy the taste of your Chez Steakhouse bacon-wrapped sirloin even more.