Fin-tail management – 5
Discounts and marginal deals – Offensive weapons or signs of beginning difficulties?
Uncontrolled discounting is a tumor and is as life-threatening. It is either a result of poor sales, or a result of tough competition, or even poor management.
In these times we must quickly realize the difference and act accordingly!
The salesman says, “we will not get this order without a discount”.
There are few executives who can resist the smell of order, even when the discount is high. And that’s probably right, as the sales function’s responsibility is first and foremost to get orders.
Warning, Warning! The management must understand the signals.
All companies are built to deliver a product or a service to the customers, at a certain price. When the price no longer is accepted, discounts are available.
But just for a while, as the market clearly says that cheaper alternatives do exist! Continued discounting with limited cost coverage is understandable, but only for a while.
There are three ways;
- Reduce costs so that prices are acceptable without discounts
- Develop your offer so it justifies its price
- A little of both
This balance act is handled by correcting your offer to the market, and often also your business idea, so that both describe what you offer and what you want in return from your market in terms of cost coverage and profit.
It’s all about choosing – keeping or cancelling – so that your own costs are matching your customers satisfaction. Keeping is easy. Cancelling is very difficult. Just like losing weight. Sad and boring, but necessary!
I would suggest that you occasionally have a “medical check-up” to avoid cancer. It is simple – just compare your costs for discounting over time with your profit over the same time. Yeah, just do it! It is a life-insurance!
A fish does not care about any check-ups It simply swims on to other waters, where food is available. For us it is not that easy!
How do you handle this? Curious about how others handle it? Drop a line!