Discounts are Costing You NET PROFIT!

Lee Newsletter Pic Controlling discounts is a major task in many stores. I have seen managers who consider it part of doing business and others who refuse to at all. Regardless, every time you do, it costs you net profit! Are discounts out of control in your store? We should have learned from the sales side the people directly connected to the emotional contact point with the customer will buy into the emotion of the moment and give it up right away, or better yet, let me check with my manager and let’s see what we can do.

They might as well say yes with that line. The one I love is the senior citizen discounts. What is a senior citizen? Without clearly defined guidelines, it can get crazy – quick!

Here are a few suggestions:

Develop a Written Discount Policy

The manager should outline their expectations in a written policy. The first question is: What is a discount? If your prices are competitive in your market and you have an established pricing policy, why discount as a normal course of business? Other Independent Service Providers (ISP’s) don’t do it, they have trained their people to address the request and say no without offending the customer. Call an area ISP in your area and ask for a price on a water pump replacement. After receiving, ask them for a discount and see how they handle your request. Why are we convinced this is a normal course of business? How did the customer get this notion we will discount. It may be because we have honored the request in the past and given them the 10% off we normally give. Once you start, it’s very hard to stop. Are your prices too high or the level of value presented too low? The excuse I usually hear is you don’t understand our customers, they are different. Maybe they are, but a simple NO can go a long way. Because they asked doesn’t mean they think they will get one.

Measure Discounts

If you still feel this is a major part of your marketing plan, then at least measure the discounts per flat rate hour written. This gives you a good comparison between advisors. I would also recommend you spot check the customer who receives the discounts. Check for any type of patterns.

Fleet Accounts

A number of stores have done an outstanding earning and growing their fleet business. The amount of discounts should be established in a pricing policy for the customer. My suggestion is to develop a written proposal for the customer to review and approve. Once this is done, it’s locked down.

Coupons

Why is the normal discount in coupons specials always 10%? Each discounted dollar is a dollar off your net profit. Why 10% why not 5%, 6% or 2%? Who established this 10% as the “Norm?”

Friend of Boss (FOB’s)

We have all dealt with the friends of the boss. I loved it when a customer would call us and say “Oh yeah, I know Mr. Dealer, he and I are good friends”. Ask the dealer and he didn’t have a clue who he was. Ok deal with it, it goes with the territory. Each situation will be different, handle it as it comes up.

“I had to do it to sell the job”

I wish I had a quarter for every time I heard this one… Stop accepting this reply!

I don’t believe this is the rule, I believe it’s the exception, but because the advisors are focused on spending out of their pockets and not the customer’s, they will drop the price without hesitation. Some managers require the advisors to see them before discounting, this is a way to control it, but has some down sides.

Don’t think for a second I’m saying don’t discount, I’m not. I’m saying control it! Senior citizen discounts can be value added, Military is a great tool, and frankly is the right thing to do. Buyer’s clubs can be a real tool in earning additional business. The advisors can be given the latitude to discounts within the manager’s guidelines.

 

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