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.