Tina Corner StolzLXCouncil | The Global Leader in Peer Advisory Councils · Founder of LXCouncil - the leading global educator for peer advisory councils

Understanding the High Costs of Discounting

Name: Understanding the High Costs of Discounting
Uploaded: 2024-05-20T04:00:17+00:00
Duration: 1 min 14 s
Channel: Tina Corner Stolz
Description: In this segment, the speaker warns against making discounting a routine practice, emphasizing that it should remain an exception to proper pricing. They…

20 May 2024 · 1 min

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1:14

In this segment, the speaker warns against making discounting a routine practice, emphasizing that it should remain an exception to proper pricing. They explain that habitual discounting leads to mispricing, where the listed price no longer reflects true value. The speaker highlights the importance of recognizing both financial and non‑financial costs of discounts. Financial costs are illustrated with a concrete example: a $100 monthly discount results in a $1,200 annual loss, which, when multiplied by the client’s lifetime, significantly erodes the bottom line. The overall message is a cautionary call to maintain disciplined pricing and avoid the habit of frequent discounts.

Chapters

do not let discounting become standard practice. It's super easy that once you do it, that suddenly you feel like you kind of need to do it, or it becomes just a habit that you do it. And that is the worst position that you could get yourself in, because discounting should be an exception to the rule. Otherwise, if it's not, then you're, you're not pricing properly. So your regular price is really not your price. Right. And the important point here is, is that the first rule of thumb with not discounting becoming a standard practice is because you must understand the financial and non-financial costs. So the financial costs, right, are kind of easy to calculate. And I'm not going to go too much into that. I went into that a little bit in the pricing episode. And you all are smart people and you can calculate the financial impact that if you discount something by $100 a month, then you've lost out on $1,200 a year. And whatever your lifetime value of the client is, is then yearly times however many years there's a client, and that's how much you've lost to your bottom line.