For small businesses that are just starting out, offering discounts seems like the logical way to attract customers and increase sales. Sure you might make a quick buck from shoppers rushing to get a good deal but this may be bad for business in the long run. Here’s why.
The fact is that sales help bring customers through the door but that also gives them false sense of how much your goods are truly worth. As Erik Huberman, founder and CEO of Hawke Media, explains on Entrepreneur:
“People don’t see discounts as discounts — they see sale prices as the product’s true market value, the amount they should be expected to pay at any time. When prices return to their original level, people shut their wallets until the next sale. And that traps entrepreneurs in a cycle of ever-thinning margins until they can no longer afford to remain in business.”
He recommends that small businesses should build up trust with their customer base first before jumping on the price slashing bandwagon and to hit up top shoppers with targeted advertising to increase sales. You can read more about this over at Entrepreneur.