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Birth by discount
How not to start a business
When opening a new business, the first weeks of marketing are often the only advertising your customers will ever actively pay attention to, or even seek out. After that, they glance at it, grab key information, or ignore it, depending on how you have 'positioned' yourself in their mind. If implemented correctly, it can be the most successful marketing you will ever do. Something I saw recently for a brand new business in their first weeks of trade however, sent shivers down my spine: 'opening sale - 20% off'.
As a new business your first few months of trade are comprised usually by the 'early adopters' in your target audience. They're most likely to be more affluent than the rest of your market and are usually opinion leaders well positioned in plenty of social circles to tell everyone about your business. Ideally you have created methods and incentives to encourage and reward this word of mouth.
Take the 'Discount' approach and this is all turned on its head. Customers come to you in response to your discount or sale, and don't develop any loyalty. They are seeking the price - not the product, not the service, not the experience.
You have just given them free reign to compare you with your competitors!
They also have no incentive to return when your prices are in the normal range, and thus will only return when they can match the value they firs received, or if they receive an even better deal. And the 'death by discount' circle begins. Imagine how the customers who purchased a product at the normal price now feel that they can get the same thing at 20% off! They'll probably be annoyed, and if they return, it will only be to buy something at a discount because they know they've been burnt before.
Introductory offers and discounts are common for new businesses, but you need to be very, very careful with how this affects your positioning. Send introductory vouchers to opinion leaders in a very targeted fashion, but don't plaster your store or website with '20% off' in the first week of operation. In entering a highly competitive market, a better approach would be to focus on unique benefits, or create value add opportunities. For example, 'biggest range in town' or 'free $10 voucher for your next purchase' would be a much better approach than '20% off'.
What does an opening sale say to me, and probably many others? 'We've just opened, we've ordered waaaay too much stock and no-one's buying it'. I know that's not always why businesses have a sale, but often that's how a customer perceives it.
So if you're planning on opening a new business and your core introductory marketing strategy is a massive sale - think again! If you want your customers to come back, and spend more, you need to try a different tact, otherwise you'll be playing the discount game for years.
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