The Real Cost of Sale Prices

3 Pricing Incentives That Are Better Than Discounts

In the retail world, it’s discount season. Black Friday sales turn into holiday sales, at least until it’s time for the Boxing Day sales to begin. Even B2B and service-based businesses can feel the pressure to slash their prices to attract customers.

But before you launch that special year-end offer, consider what it might cost your business.

What’s The Bottom Line?

Let’s say you have a friend who owns a business with a 20% net profit margin. That means that after paying out all their costs, they get to keep $20 from every $100 in revenue.

They want to generate some new leads, so they offer a 10% discount. Customers are now paying $90 instead of $100, but your friend’s costs haven’t changed. So now instead of keeping $20, they only get to keep $10. Half their profit has just evaporated.

With those lower prices, your friend would need to double their total revenue just to get back to the same level of profitability they had before. And when was the last time a 10% off sale doubled revenue? I’ve never seen it happen. The most likely outcome is that your friend ends up working extra hard for less money.

Know Your Numbers

When it comes to pricing, you’ve really got to know and understand your numbers. And if you’re not confident you’ve got it right, you’re not alone – 85% of B2B businesses think their pricing could improve.

Keep in mind that special offers and incentives work best when they’re fine-tuned to attract the specific audience or demographic that typically becomes your most valuable customers. Across-the-board discounts can grow revenue in the short-term but eat away at your profit margins, leaving you less to re-invest into future growth (or your kids’ presents).

Try This Instead

Here are three pricing incentives that might serve your business better than discounts.

1. Free Add Ons

What’s something you can add to a customer’s purchase that they’ll love to receive but won’t come at a huge cost to you? If you sell suits, maybe you throw in a tie. You’ve already gotten a volume discount from the supplier, so the value to them might far outweigh the cost to you.

2. Bundles

Putting items frequently purchased together into a package or bundle can be a great way to increase the value of your average transaction while also offering a deal that customers will feel good about. Win-win!

3. Behaviour incentives

Imagine what would happen if every customer gave you at least one great referral. If that’s the type of behaviour you want to encourage, save your discounts for referral-based promotions (like a credit to your next purchase when you refer a friend.)

Targeted offers could also be deployed to get your customers to pay earlier, come back more often, become a subscriber or member, buy complimentary products or services, upgrade to the next tier, etc… so think strategically about how to leverage your database in a way that serves your business goals.

This Week’s Takeaway

Discounted prices can serve a purpose. By all means – clear out those unsold or dated items. Drive traffic during a slow season to keep your team busy and retain great employees. Go after a new customer demographic. But offering steep discounts because “it’s that time of year” or “everyone else is doing it” might cost more than you think.

After all - if your business is busy competing for the lowest prices, what’s the message you’re sending your best customers? 

Start 2025 The Right Way!

If you're looking for an in-depth, local, one-day program for success next year, join me in-person at GrowthCLUB on December 6th at the Living Arts Center, from 9:30am to 4:00pm to make creating tactical plans for your business both educational and fun.

We’ll cover expert tactics for boosting lead generation, goal setting, plus quarterly and annual planning for 2025!

Click here to learn more and register!

Good Strategy Bad Strategy: by Richard Rumelt

This book is perfect for leaders who want a clear, practical framework to create meaningful progress without falling for the common traps of "bad strategy." Rumelt breaks down what truly makes a strategy effective, cutting through the fluff to show how real, actionable strategies can overcome obstacles and drive impact. With clear examples from companies and challenges across industries, he introduces nine "sources of power" that you can apply immediately to your business.

Check it out!

Looking for More?

If you want more hand-curated monthly content featuring exclusive ActionCOACH training videos, new and useful resources, plus local events, grants, and awards, head over to The Extra Mile In Action – to find out where leaders go farther!

Thanks for reading The Extra Mile! Subscribe to receive new posts and support my work. If you enjoyed what you read, share or leave a like!