Why Lowering Costs Doesn’t Lead to More Money

Discounts aren't necessarily the best way to bring in more customers and sell more products - here's why.


January 12, 2024


Insights, Global

As consumers, we have all been tempted to ask for a discount or negotiate the price of a product we want to buy. On the business side of things, to close the deal, sales representatives may offer discounts to attract customers. However, some sales reps may feel guilty or ashamed for not offering a discount to long-time customers. They might think that offering a discount is a gesture of appreciation towards them. But simply lowering the price does not benefit the business or the customer. In fact, it could be detrimental to the bottom line, which should be the top priority of every company. If the bottom line is not in good standing, then there is no business or product for the customers. No matter how much we care for our customers, lowering prices can compromise the quality of your product, which is unsuitable for the business’s long-term financial health.

Businesses should prioritize maintaining the quality of their products rather than lowering their costs because we care about our customers. It takes money to sustain the quality of a product, service, and brand experience. When businesses fail to maintain that standard, they risk losing the customers with whom they have worked so hard to cultivate a relationship.

Four things happen when businesses lower their prices.


It sends the wrong message to the competition

If you live in a community and your neighbor sells their home for a price significantly lower than its actual worth, it brings down the property value of your home and other similar homes in the neighborhood. On the other hand, if the same neighbor sells their home for a price significantly higher than what they paid, it sets a new standard for the worth of the houses in the locality. The same is true when a business sells something similar at a lower price; it tends to lower the industry rate.


It strains and drains the bottom line

For a business to continue operating, it must generate a profit. However, providing too many discounts can adversely affect the company’s financials. As a result, businesses must ensure they achieve their sales targets and are on course to meet or surpass their desired profit margins.


It creates an unsustainable expectation

When a discount is offered to a customer even once, it sets an expectation that the same discount will be provided in the future. This could also lead to other customers expecting the same discount if they come to know about it. Furthermore, providing constant discounts to multiple customers is not feasible in the long run.


It diminishes the value of your brand

Discounts can hurt the value of your brand. Consider discounts as equity; the more valuable your brand is, the more equity it has. Just as taking out a home equity loan against your mortgage can affect the return on investment (ROI) and lessen the value of your home, offering discounts can have a similar effect on your brand’s reputation. Your brand’s reputation is its worth, and offering discounts can cheapen it, making it less valuable.

It is highly recommended for businesses to offer sales promotions periodically. Unlike discounts or price reductions, a sales campaign aims to draw attention to a particular product while attracting potential and existing customers. The primary purpose of sales promotions is to increase profits and improve your brand’s reputation by aligning with your bottom line.

Businesses should never feel guilty or inconsiderate for not offering a reduction in their prices, no matter how much they value their customers. If businesses value their product as much as they value their customers, they will ensure that both have a high-quality, consistent experience with every sale for as long as they’re in business.

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