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What Does Discounting Really Cost Your Business?

Many businesses are struggling during the Covid-19 pandemic. If you still have your doors open, either literally or online, you might feel you need to do whatever it takes to keep customers interested. You may find it tempting to discount your goods and services in a bid to keep customers in your corner.

Discounting may boost your cash flow for a short time, but there can be drastic long-term consequences that make it even more difficult to bounce back once lockdown laws are lifted. The damage to your brand could be irreparable, not to mention the toll taken on your bottom line.

So, where is your business’s brand positioned? Will discounting do more harm than good? As you consider how to increase profits in this difficult time, here’s what to keep in mind about discounting.

The Hidden Costs of Discounting

As humans, we’ve been conditioned to love a bargain. Bargains make us feel special—like we’ve beaten the system. From a business perspective, however, a product’s price—be it full or discounted—is linked to the value of your product or service. We all know “cheap” does not go hand-in-hand with “quality” in the eyes of the consumer.

If you start discounting, you also train your customers to buy from you only when there’s a sale. Watch your business profit margins plummet once that mindset sets in.

If you’ve positioned yourself in the market as the “cheap” option, then, by all means, keep discounting. Your customers have come to expect it. However, don’t expect them to be loyal. Most bargain hunters are just that: hunters, sniffing out the next bargain. If your competitor offers them something similar at a better price, they’ll be gone before you can say, “But wait, there’s more!”.

If the potential damage to your brand and the potential loss of customers wasn’t enough to discourage you from discounting, have you done the math on the financial cost? If you reduce your price by just 10% on a margin of 40%, your sales will have to increase by 33% to make the same profit. You’re in a business to make a profit, right?

Think about whether your brand can sustain itself on its quality, value, and reputation alone. There are better ways to attract customers (and keep them) than to gut prices. At least do the math first. Will it pay in the long run to discount, both from a customer and profit perspective?

Find an alternative to discount sites

Just about every business owner has been approached by a discount or daily deals site. If you haven’t, it’s only a matter of time. They’re hungry for your business. Remember, they don’t care about growing your business; they care about growing theirs. All they need are your discounted offers to lure customers in so they can take their cut. Does this sound ruthless? It can be!

Sometimes, these sites work too well. Businesses have gone under trying to service discount site customers that overwhelm them, edging out regular, loyal, full-price paying customers. Be very careful.

These sites usually charge a fee of 15-20% of the sale price of your product or service. They also often insist that the offer be discounted by at least 50%. Do your math again and determine how many sales you’ll need to make to full-price customers to compensate for this lost revenue. You’ll be shocked how long it could take you to dig out of this hole, all for customers who have no intention of building a relationship with your brand.

There are much smarter ways to bring in new business and to attract loyal customers who are happy to pay full price.

Loyal customers are the key to sustained success

Even in these difficult times, your business can flourish. You don’t need to increase your prices, but you don’t need to lower them either. You just need to look around to see that many businesses are still trading and doing well. You may just need to take a step back, think outside the box, and find other ways to keep your business afloat and your cash flow positive.

Tapping into a cashless trading network such as Bartercard can open the door to new customers who are happy to pay full price. In fact, members are discouraged from discounting; they pay for your products and services with Trade Dollars (equivalent to the cash economy), which you can then use to spend with other members, keeping cash in your business.

Unlike customers on deals sites, Bartercard customers are extremely loyal. If you look after them, not only will they keep coming back, but they will bring real cash customers with them.

It’s not uncommon for new Bartercard members to increase business profits by 10% in the first 12 months, which is a steady, manageable, and sustainable growth rate. This represents new business on top of your cash clients. No discounts are needed!

Don’t sell your business short

Put your business in a position to succeed. Find out how Bartercard can help you gain new customers without undervaluing your products and services and become a Bartercard member today!


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Access Bartercard for 1 month complimentary* to see if it is the right fit for your business growth.

Access Bartercard for 1 month complimentary* to see if it is the right fit for your business growth.

*Membership fee may apply. Transaction fees will still apply for any trades that occur within the first month. Monthly membership: $49 a month, trade fees may apply.