Are discounts helping or hurting your business?


Although before last year, I couldn’t remember Black Friday being a thing in the UK, this Black Friday I have already been bombarded with e-mails from at least 10 large companies. This was followed by smaller outlets jumping on the bandwagon, trying to convince me to spend money with their ‘amazing deals’.

Like most people, I was intrigued by the deals that Amazon and others were offering but so far, I’ve been strong and resisted buying anything that I don’t actually need. It’s still early in the day though, so no promises!

As I made my way through the sales e-mails, I noticed that for some companies, I started to feel a bit annoyed, disappointed and almost cheated.

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Say goodbye to customers

...and watch your business thrive!

I've complained in another blog post about a particular customer that was causing us problems. She was employed by her company to do a job which she didn't understand and couldn't do. They hired us to build a new web site for them, which we did and then we set up a monthly maintenance contract with them to perform a couple of updates on the site each month and generally provide up to an hour's support each month.

From the outset, the monthly fee that we charged was not enough to cover the actual work that we were doing but I didn't want to cause problems with the customer. They were a good customer, in that they had paid us a lot of money to develop their new site. They had links with lots of other companies and so I thought that there could be potential to get more business off the back of them.

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Two is better than one

150420 two better than one

Most businesses are based on a single type of income model. Garages, electricians and restaurants all rely on selling their services for a one off cost. If you need your car fixed, you pay the garage a one off fee for doing it. Fancy a meal out? You'll need to pay a lump sum to do so. These businesses rely on large one off purchases to keep going.

Other businesses, such as internet providers and T.V. services (think Sky Sports or Netflix) are subscription based. They rely on a large number of customers paying a little each month.

Each business model has its own benefits. A normal business generally requires a lot of work for each new customer. For example, if you're a mechanic, you fix a car and charge the customer £200 for this. That's a lot of income in one go but what happens tomorrow? What happens if no cars break down, how will the business survive?

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Go forth and multiply

After 10 months of setting up my first business, I started thinking about how I could grow the business even more.

After some thought, I decided that the best way to do things was replicate what I was already doing and put the prices up. Simple! Raise your prices and double your income! Well, not quite.

My original business was based on low costs and simplicity. Let's imagine I was running running a bed and breakfast. It's cheap, just £30 a night for a double room. You can imagine the type of business model and the type of people that the B&B would attract - people looking for a cheap weekend away and purely basing their choice on cost, there's no customer loyalty so people can easily walk away at any time.

Now, to improve our business we could continue to do what what we're doing. The business is growing steadily and we're doing well but we want to increase profits a bit quicker. What can we do? Putting up our prices would turn away exactly the customers that we have been attracting up until now and this may put the whole business model at risk.

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