What is better: benefits or discounts?

Both are powerful weapons that will increase your sales, but only one will achieve a sustained growth for your business. Discover the benefits of each strategy and which will work best for you.


How do I get my clients to buy the product and return for more?

This is the question that many executives, entrepreneurs and professionals ask all the time.
Without a doubt, benefits and discounts are essential pieces of the business professional’s toolbox. A good deal can be a tempt a consumer to make an impulse purchase for things they do not need.
Of course, clients love discounts and take advantage of them whenever possible. At the same time, discounts are also beneficial to business results for their immediacy, simplicity and easy implementation. They also help to generate peak demand, move inventory, attract new customers, and even help wage battle against direct competitors, but discounts are not efficient solutions or strategies to retain customers. Here's why:


1. Discounts are by definition are fleeting solutions. The sale price typically falls below the normal range price and becomes a non-sustainable sacrifice. However, if an offer is well designed —in absolute terms— that sacrifice is more than offset by the increase in volume. Upon returning to its price, the product should return to its normal volume, or depending on the product, can undergo a temporary downturn. Discounts achieve extraordinary spikes in demand and will generate a momentary increase in sales. If you need an investment to flow rapidly, to settle a debt, or need to clear inventory, there's no better tool than a discount.


But if what you’re looking for is sustained sales growth, what will you do when the discount peak falls?


2. Discounts do not result in added value for you, your products or your customers. When a discount is able to attract people to test your product, you can assume that the discount itself is the main incentive for the purchase. So, if the discount is not accompanied by another stimulus to help repeat the purchase, the customer will not return.


3. Discounts are easily replicated or matched by competitors. There is nothing easier than to lower prices. Beyond the cost of spending and some collateral, just a couple of ads, if required, and a simple re-labeling is all you need.

However, if competitors match the discount, what more can be done to motivate customers then?


4. Discounts misinform consumers. A repeated discount creates two possible customer perceptions that could be harmful to your business:
a. As in the case of in a price war, the discounted price is the value of the product. Customers are no longer willing to pay the list price for the product and it will suffer a decline in its actual market price.
b. Even if customers think the product is worth the price, they know that if they wait a bit longer, they can get the product a little cheaper. The product will suffer a drop in sales regularly during your discount season. If either of these situations happens, what can be done to improve margins and increase sales or to boost sales during the periods without discount?


The best solution


Just like with discounts, consumers love benefits. They enjoy the recognition of being served with distinction, being praised with a gift or receiving courtesy without paying for the extra attention that can lead them to buy products and services they probably do not need or could replace with simpler options.


The big difference between the discounts and benefits is, of course, their duration, as well as the level at which they are tested by customers.


In terms of duration, benefits take time to take effect. They take much effort to design and plan and require the commitment of several areas of the organization for proper implementation.


However, the investment is more than over-compensated by the continuity and long-term value of their results. A customer who finds value in a product, beyond its intrinsic value or price, is a customer who will buy again and chose the product above other competitors.


Benefits, unlike discounts, create a link between the product and the customer and provide added value to any unbeatable low price. They are also difficult to duplicate by competitors. Discounts are definitely great tools that generate immediate results at an attractive low cost and ease of implementation. For their part, benefits are more complex in structure and require greater investment to achieve. However, benefits sustain long-term viability and promote the continued growth of a business.


The next time you have to develop a strategy to increase demand for products, ask yourself: Do I look for an immediate or a long-term solution? If immediacy is what you seek, use discounts and be wary of the implications that they bring along. If long-term investment is what you’re looking for, benefits that will strengthen customer loyalty and ensure sustained growth for your sales and business are your answer.

Do we all deserve loyalty?

From an airline company, to an architect, to a factory or a taxi driver, all industries, businesses and professional offices can develop a good loyalty strategy.

Loyalty is a theme that is complex and full of different views and opinions. But the question that must be asked is whether it is relevant to us all.

In a conceptual manner, one can ask: Are all industries susceptible to loyalty strategies? Or, more pragmatically: Can my business, profession or trade benefit from a loyalty initiative?

The indisputable answer to both questions is, YES! From an airline or an architect, to a factory or a seamstress, all industries, businesses, professional activities and professions can benefit from a good loyalty program.

Let´s test this! We may think that an independent taxi driver is not susceptible to loyalty initiatives for its customers:  When an independent taxi driver thinks about his next passenger, he must rely on strangers that signal him from the sidewalk to carry them from one point to another, and then disappear without possibly ever seeing them again. The reasoning for this taxi driver is that the customer is simply the result of a coincidence of space and time, virtually impossible to replicate, and therefore irrelevant to deal with any loyalty strategy. Sometimes, the attitude is enough .

Now let's look at the situation from the client’s viewpoint. When the person is on the street and needs a taxi, does he simply approach the sidewalk, signal for a cab and climb into the first vehicle that stops for him? Of course not. First of all, the passenger considers whether he should take a taxi from the street or call for one. If he chooses the first, he gets closer to the sidewalk, begins to wave his hand, and when a taxi approaches, he enters the second phase of the evaluation.

After the taxi stops, the man considers: does the cab look legal and does it have it badges and documents in order? Is the exterior clean? Does the cab arrive at high speeds or moderate speeds? Does the driver approach the sidewalk prudently or negligently? Consciously or not, all these criteria have crossed the client's mind, all before even coming into contact with the service.

After the second evaluation phase, comes the third with these questions: Does the driver seem clean and pleasant? Did he greet the client with kindness and look the client in the eye? Does the driver start the meter as he should and does he specify the rate that applies to the trip? Is the interior of the car clean and neat?

Assuming that this stage passes and the client has reached a decision to take the taxi, the questions continue: Does the driver handle the taxi well? Does the driver offer route choices to reach the destination? Does he offer to open or close the window to make the trip more enjoyable? Does he play music? Does he smoke without asking if it bothers the client? Upon arriving, does he request payment pleasantly? Does he thank the client for choosing his taxi and does he wish the client a good day? We could continue to provide all the factors or criteria you use to evaluate customer service.

And finally, if this client were you, and you had an extraordinary experience in the taxi and know you’ll have another trip soon, do you ask the driver to wait or return at a certain hour? Or ask for his card so that you can call for him at another time? And then we ask the last question regarding the taxi’s service: Is he prepared to give you details so that he can be contacted for services in the future? In short, these taxi drivers have executed, knowingly or not, a good strategy for achieving customer loyalty.

Turning back to the pragmatic question with which we began this exploration: Can my business, profession or trade benefit from a loyalty initiative? YES, any situation where there is a relationship between a supplier and a consumer of a product or service presents an opportunity for loyalty.

Of course, complexity and implementation of the strategy changes depending on the trade or business and the customer profile. But if an independent taxi driver, an alleged victim of chance, can generate loyal customers through a good attitude, imagine what a proper loyalty strategy can do for a tailor, pharmacy, clinic, multinational financial services company, or the government. We all deserve loyalty.