Don’t Discount; Give it Away for FREE!

This article was written prior to the merger with Think Shift under its previous name, LogiStyle.

In my experience as a corporate executive of manufacturing companies with product-based businesses as well as in my experience here at LogiStyle, a service based business, customers and clients often seek special discounts on our products or services. They feel they got a deal if they land a discount. Vendors often tend to price accordingly, recognizing that the net price is going to be discounted from its listed price. Published discounts available to all parties, with rules and restrictions, are certainly understandable. For example, at LogiStyle, we offer Early Registration discounts and KickStarter discounts, encouraging people to register early for our workshops. We incentivize them to register early giving us some assurance that the workshop is going to be adequately subscribed. Similarly, product based companies often offer volume discounts, recognizing that they enjoy economies of scale.

How about special discounts to close the deal with a customer or client that is on the fence?

Is there any business rationale for entertaining such special discounts? If so, who gets it and who doesn’t? Does the loud and obnoxious, or the adamant and stubborn, get such discounts leaving the rule-abiding and cooperative customer paying list price? Will such a practice of offering special discounts cause more people to line up for them? Once you start offering them can you ethically say “We don’t offer special discounts,” when you don’t want to extend a discount?

With that as context, we propose a provocative idea.

Adopt a policy of no special discounts, with the caveat that when you feel compelled you will give it away for free.

At LogiStyle, we make a practice of not offering any special discounts beyond our published discounts. However, on occasion when we have a potential client who has not been exposed to our workshops, and presents an opportunity for a large volume of business, we have offered a complimentary invitation to one of our workshops.

The advantage of offering something for free instead of offering a discount is that the client or customer is unlikely to ask for another unit for free.

They appreciate that the business cannot keep giving things for free. When you give them a special discount they want that discount the next time over.

You might think that this technique works for service-based, but not product-based, industries.

To dispel that notion, let us share an experience from a high-tech company that worked very well. Industrial customers of high-tech products fully comprehend that there is a manufacturing cost for hardware, but often feel that they should get software either free or heavily discounted. At this high-tech company, we had a strict rule of not discounting software. We would give away hardware for free, but refused to discount software. This way the customer never dared to ask for another free unit of hardware and understood that the software will not be discounted.

The game of individual discounting is a slippery slope. It feels good to close a pending piece of profitable business by offering a small discount. You feel that between the time saved and the business closed, you have come out ahead. However, you are simply adding a liability on your balance sheet for the benefit of enhancing your income statement for this period.

Food for Thought is our way of sharing interesting concepts on corporate leadership and management with others who might find it useful. The thoughts offered are intended to be controversial and thought provoking. They are intended to help our readers intentionally realize their potential, what we call Potentionality.