Quick fix can backfire

Giving customers a discount sets a risky precedent that can harm your profitability, so consider other options first

- Anthony O’Brien

Discounting may seem like a good strategy for your small-to-medium enterprise (SME) in these challenging times as it’s a quick fix to nail down some sales and keep cash flow ticking over. Already two in five (42%) Australian businesses have had to access support measures to manage the impacts of the Covid-19 pandemic, according to the latest research from the Australian Bureau of Statistics.

For small businesses, however, discounting is a strategy that can backfire in the longer term, especially if your SME is already working with clients doing it tough. More than 70% of businesses in manufacturing (78%), wholesale trade (74%), recreation and personal services (83%), information media and telecommunications (75%), property and business services (74%) and transport, postal and warehousing (72%) have been affected by Covid-19 to some degree, researcher Roy Morgan reported earlier this year.

Look at other options

When you offer a discount, whether it’s a first engagement with a customer or for a long-term client, there’s no going back once the offer is made. As soon as you drop your price, your customer will expect the discounted price to continue – or they’ll hold out for another special offer. Worse still, they may not buy from you until the discounted price or fee is back on the table.

Although a discount might seem like your only option to win over or keep a client, it’s not. Moreover, you don’t want to set the precedent that every time your client commissions work from you or buys your product, it’s at a reduced price. That is simply bad business, says Anne Nalder, founder and chief executive of the Small Business Association of Australia.