In this month’s column for Elite Franchise, Ian Christelow of ActionCOACH talks about the true cost of discounting and the importance of adding value.
I recently bought my mum some truffles for her birthday from an artisan chocolatier. After I’d paid, I realised I hadn’t handed over the local discount card to get my 15% saving. Not to worry and quick as a flash, the owner said: “How about two extra chocolates instead?” Well, I can’t remember ever turning down chocolate before, so I picked out two delicious pieces and walked away feeling satisfied with my transaction.
It was clearly a shrewd move by the chocolatier who understood one important business principle: By giving me more samples of his work, this would encourage me to visit his establishment again. That simple bespoke service is always a winner and he hadn’t really lost 15% of my bill. He’d added value. The goodies that were worth £2 to me, probably only cost him 50p to manufacture. His actions had improved his brand image by leaps and bounds, while painting his business as flexible, friendly and generous. In the words of Arnold Schwarzenegger, “I’ll be back!”
Discounting drags your brand down. You’re suddenly a cheap option for cheapskates. What you want are loyal customers, willing to spend on the quality of service you offer. Consumers are wise to discounting ploys, and becoming wiser all the time. They look for the small print, while checking details to find out how long that product has been at the higher price for. From now on they won’t visit your store until you’re having a sale. They probably joke that you’ve been ‘closing down’ for seven years. But adding value is much more rewarding. It saves you money and adds kudos to your business.
How many times have you raged to your insurance or broadband provider about the unfairness of losing your initial discount? Or being offered nothing in recognition of your many years of loyalty? Do these experiences instil an impression of companies that have strong morals or a high regard for their customers? Or does it make you slam down the phone and go in search of another provider? Simply put, existing loyal customers hate it when they feel they’re being treated with more contempt than prospective new ones. And we’ve all been there. Do not take your customers for granted.
The same applies to ‘free products and trials’ which are introduced to entice potential new customers but often just give an impression that the product on sale is of little or no value. My advice is to tread carefully along this path or avoid it altogether. Instead, you should implement one of the many other strategies that will help to entice customers through your doors and create an impression of high value.
People do think price equals quality, and if you want to build a brand which people trust, then don’t discount it. Kellogg’s still makes their own cereals and then sells them at twice the price of a supermarket’s own products. In turn, customers obviously think their offerings are twice as good, and primarily because of price. You won’t find Kellogg’s discounting.
I learned an important lesson during my early days with ActionCOACH. We decided it would be a nice idea to gift every franchisee a Mont Blanc pen as part of their welcome pack. With an initial order of 100, we figured we’d get a substantial discount, because of bulk buying, and we assigned our then Area Developer for the south-west, Tom Malone, to handle this negotiation. He was a man who’d made a career out of buying premium brands at low prices. But Tom reported back that even if we were buying 100,000, they wouldn’t give us a penny off. They told Tom the company had never given anyone a discount. However, Mont Blanc did offer to add value to their premium product by engraving it as a complimentary thank you for our custom.
When it came to the vote on adding the £200 pen to our franchisee welcome pack, I was out-voted. However, I did notice that our Area Developers suddenly started turning up to our monthly meetings with these new Mont Blanc pens. Reassuringly expensive eh! I must admit, I also wanted one and realised the importance of Mont Blanc’s decision. They simply didn’t want any of their customers to feel angry through finding out a friend had purchased an identical product for less and Mont Blanc understands their no discounting policy increases the perception of being a premium brand.
I eventually bought one of these pens at an airport but not for £200 – the price had actually gone up. Nowadays we present a Mont Blanc Platinum Pen to all our franchise partners when they achieve the milestone of a monthly client income of £30,000. Sometimes it’s those little things, which no one is obliged to do, which speak louder than words. It’s a way of telling your customers they are special and valued.
