Is “massive discounting” a sign of panic or just smart business?

discounts-as-carpet-cleaning-marketing-strategyI spend over $1,000.00 annually on books.  Yes, I am addicted!  But I justify my book buying as fodder for my Big Billy’s Books & Blogs column here on this site! (You can check out all my BBB&B posts here.)

Because of my voracious book appetite (OK, maybe it IS an obsession!) I am always on the lookout for the best prices. I use Amazon quite regularly as well as Barnes & Noble and Borders. Usually if I cannot find a particular book at B&N or Borders on sale I will order it from Amazon as they are always about 33% cheaper than these two “brick and mortar” stores.

Barnes & Noble charges 25.00 a year to join their readers club and only then you receive a 10% discount on all purchases. This means you have to buy at least 250.00 in books just to break even. Borders offers their Readers Club for free and send out a weekly coupon for a discount of 20-40%. So guess what?  I buy 60% of my books at Borders and about 30% at Amazon!

Lately I have noticed that Borders is sending out more coupons and for higher discounts. This week one coupon ended on the 1st of the month and the next coupon started on the 2nd. The only thing they are accomplishing with me is keeping me from Amazon.

So is Borders panicking? Or are they savvy entrepreneurs?  Remember, I may not be the typical customer as I seldom go in with my coupon and buy just one book. Instead, knowing me I will buy a second book (or a third!) if it has a 20% discount due to it being a new release.  But what about the average customer that buys only one no-profit discounted book and then leaves?

Here’s my questions:  Is Borders making enough money from me to turn a profit on my business overall?  Sure, I spend a lot with them but is it profitable? Is there enough markup on a book to absorb a 40% discount?  More importantly, where is this mass discounting taking them with their average customer?

This is the same question you have to ask yourself for your business. If business is slow should you be offering a 20-30% discount to generate income?  If your margin is 20%, you are on your way out of business!

Here is a novel idea- instead of cutting your price try to sell additional work at the home for a lower price. (That’s right- a discount but ONLY on extra work such as high profit Scotchgard application!) After all, your expenses are fixed and covered once you are already working in the home. Your customer will appreciate the value and you will still be making a profit.

Larry Steinmetz says “business is a game of margins, not volume”. So please burn this into your mind- “Price is always more important in the mind of the seller (that is YOU) than it is to the buyer.”

Here is the rest of the story- Borders is in deep trouble. If they continue attracting non-profitable customers like me they will be filing bankruptcy. Learn from the big guys. Massive discounting across the board is seldom the right choice in any business.  On the other hand, “selective savings” offered to the right customers of  high-profit “upsells” will increase your volume and super charge your bottom line!


1 thought on “Is “massive discounting” a sign of panic or just smart business?”

  1. You are under the impression these coupons are mass distribution … they may have analyzed what you bought and found out it is profitable for them to get those extra dollars from you. They may only have a few people in the world that get these discounts.

    Without knowing more i cannot say if its good or not.

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