Is offering a price discount a good way to build customer worth?
Is price discounting a good way to build customer worth, or does it only attract more one-time customers? How can we figure out if offering a discount every so often will actually help us build customer loyalty and customer worth in the long run?
This is a very interesting question, and the answer is, it depends. However, you've already sort of answered the question yourself. Whenever we offer a price discount, we run the risk of teaching customers that the value that we provide for them is simply a cheaper price. That's probably the least valuable thing that most customers are looking for. In a down economy, of course, many customers appreciate all the help they can get, but there are many companies that have so completely trained their customers to expect a discount that the customers won't buy any other way, and will only shop if they have a 25% off coupon in their hand. When this happens, we've become price-driven suppliers. Our goal is to do something else, to go in the other direction, to take information that we have about customers and use that to treat customers so well that that they don't want to do business with anyone else, for any price. Even very price conscious customers have something on their shopping list that they are going to purchase, I'm not saying at any price, but where the price is not going to be the primary consideration. It really does make a difference to a customer to have not just quality products and quality service, that's a given, but also to have exactly what's needed, to be able to trust the company she's doing business with, to be able to know that he's going to get a straight answer and not be sold something for the sake of a commission. Ultimately, what you want are the customers who so value what you can do for them that they want you to stay in business and they understand that you have to make a little bit of profit for that to happen.
So, in general, if your approach is to discount a product on a regular basis, then you're probably going in the wrong direction. In general, companies should have the ability to hold fast to a fair price and have customers value that enough to participate and collaborate with them. Now, having said that, occasionally it is nice to give somebody a present or a reward for being such a valuable customer and that's something I think any customer will appreciate.
Hear more in Creating Customer Value, a SearchCRM.com monthly podcast series with Peppers and Rogers.
This was first published in August 2008