The culture of discounting

Have you noticed that everything appears to be ‘on special’ these days. It seems no one is paying full price for anything anymore and most consumers now expect a discount on almost everything they buy. We have a culture of discounting and are moving towards what is common place in Asia and the Middle East, haggling on price over everything.

I remember when I bought my first car. It was a ’73 mustard yellow Corolla and I spent what seemed like ages haggling with the seller to save myself a few dollars on the price. In the end I drove away with my prized possession straight to a car audio shop to pay full price on a pumping car stereo and some seat covers. If had even though about asking for a discount on the car stereo, the sales guy would have probably just laughed at me. These days if you pay the full price for any electronics then you are probably being robbed and you can usually cut 5-10% off the price just by asking, even at major retailers.

First there were the rug sales, 70% off everything. Then there was curtains and blinds, 50% off or second set free. Now every second ad on TV is talking about discounting a product or having something on sale. The important thing is, I don’t think this is genuinely being driven by customer demand; it is driven by the retailers continually offering discounts, so much so, that now the consumer expects them. The result is sales staff that are in a discount mentality, offering discounts as part of the normal sales process, without even waiting for the customer to ask for one and certainly not considering whether they need to.

I encountered this when I took my family to the beach for a week to a small coastal town in Gippsland. During this holiday my wife accidentally broke me daughters laptop screen, so off I went with my daughter to the nearest major town to buy her a replacement. I won’t name the retailer we went to but it was a major national brand. The sales guy was very helpful, letting my daughter use Windows 8 to get used to it, showing her how it worked and giving her time to decide on what she wanted. When we finally chose a computer – I was happy with the service – and I figured that while maybe I could save a few dollars on the sale by bargaining, the price was reasonable and less than I expected to pay in rural Victoria, so I said I’d take the product and followed the sales guy to the payment counter.

We get to the counter, he punches the details into the computer and says, “I can do it for a bit cheaper if you like, how about $xxx?” Well obviously I didn’t say “No, I really want to pay the higher price” and so he just gave away some of his profit. Maybe he thought that would make me a more loyal customer, but he knew we were from out-of-town on holidays so we weren’t likely to be back any time soon.

I had committed to buying the product and had not even mentioned the price…so why discount it at the point of sale?

Unfortunately we have seen this kind of approach when ‘mystery shopping’ self storage businesses as well. On some calls, the salesperson mentioned the price before the shopper has even enquired about it, often something along the lines of “that sized unit is $150 a week, but I can do it for $140 for you” all in one sentence. What’s more, by the time they get off the phone the price is even lower. If you are willing to give away that price to everyone, why not just start there.

Don’t think that if you offer a discount up front that will stop the customer asking for more, it is more likely to encourage them to haggle with you as you have just declared that discounting is the go here. If you are particularly unlucky it may also inspire them to call up the last place they rang and see if they can get a better deal from them. If they are a genuine price shopper then they don’t care how long it took them to get your best price, they just wan to compare it to everyone else’s. No matter how you look at it there is no point in opening with a price and then immediately discounting it.

All the research done across the world says that price is not the major driver for self storage, but one of a combination of factors including; security, location, access and relationship with staff. This does not mean that people shopping for self storage won’t try to get a discount, of course they will! The reality is they have probably already decided where they want to store and are trying to get the best price at that place, or they are trying to get some leverage from you, so they can take your price to where they really want to store their goods.

That’s not to say there is not a role for discounting in self storage, it is after all mostly a retail business, however there is usually a time and place to look at cutting the price. It may be because you have an abundance of that kind of unit, or for that particular customer discounting will genuinely give you an edge to get them over the line. It could also be a way of getting them on board and then selling them some insurance or packaging products at full retail.

It’s all about pricing for purpose, considering why you are offering a discount and not just becoming a contributor to the discount mentality.

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