In a recent post I explained why PREMIUM product providers should not gratuitously offer discounts…the main reason being, they’re not commodity providers.
I also mentioned how most people offer discounts out of a sense of low self-worth. They don’t believe their product or service is actually worth that much.
One of my newsletter readers Shane (who is at 7 figures in his business) pointed out that, “If we could learn to sell water or oil cheaper than anyone in the world, we would be billionaires…that’s were discounting works.”
Fair point. Fact is, you CAN make money from discounting, but only if you do it the right way.
Here’s a quick story to demonstrate my point:
There’s a famous graffiti artist named “Banksy” who anonymously creates art on the streets of England.
No one knows who the real Banksy is… but many have speculated. And rumors abound.
Banksy artwork offers bold perspectives on societal issues. It’s unique, rare, and it pops up on buildings, streets, and other surprising places. Sometimes the artwork lasts only a few hours before it’s removed by authorities. The artist’s mysterious identity adds to the allure.
Banksy artwork sells for tens of thousands of dollars per piece.
Banksy himself doesn’t actually sell his artwork. Apparently he’s an anti-capitalist, among many other things.
However, people have been known to extract his artwork from the physical locations where it’s created, then sell it to the highest bidder. For example, Christina Aguilera bought an original Banksy of a lesbian version of Queen Victoria and two prints for £25,000 (worth $32,000 USD). A Banksy set of Kate Moss paintings sold for £50,400 (worth $64,719 USD) in London.
But what happens when you discount this artist’s valuable work at “insanely low prices”?…
Nothing. Nobody buys anything!
A June 2014 article in the Guardian describes how a man set up a street exhibit featuring several Banksy artwork pieces.
The asking price? $60 per piece.
The Banksy artwork was positioned amongst other street exhibits offering cheaper items for sale.
“It was not surprising that for most of the day the man selling black and white Banksy prints in New York got no takers. Coming from a pop-up stall in Central Park, among many others selling cheap tourist souvenirs, they were outrageously expensive at $60 each. Gift shops were selling artists’ posters, greeting cards, mugs and coasters for a fraction of the price,” says The Guardian.
During an entire day, only a handful of people bought Banksy pictures, totaling a mere $420 in sales.
Most of the buyers probably weren’t aware that the pieces they’d bought typically sell for far more…like 5 figures more.
They were just comparing the $60 price tag to other artwork that was priced much lower. The Banksy art became a “commodity,” not much different from junk being sold at a garage sale.
This is a great example of what happens when valuable products are treated like commodities…with a ridiculous discount slapped on them. Nobody buys them. They just blend in with all the other cheap stuff out there.
“A man who had bought two canvases from the stall, proved, by mid-afternoon, to be only the second customer for the prints. But this buyer now stands to make a small fortune. The pictures have been authenticated by Banksy; they are going to auction at Bonham’s, in London, and they could fetch up to £120,000,” says The Guardian.
The whole thing was a stunt pulled by Banksy himself, most likely to comment on the nature of “value” in our society.
It offers a great lesson for business owners selling premium products and services: you won’t necessarily make money by discounting your stuff.
It also begs the question, how highly do you value your own products? People can’t value them any higher than you do.
How to Offer a Discount without Cheapening Your Brand
Here’s the truth…discounting CAN work. But there’s a right way and a wrong way to do it.
My aforementioned reader Shane offers a discount once a month to his email subscribers — he calls it an “Outrage Sale” — and makes tens of thousands in sales. (I myself made an $11,000 sale once after offering my editing service for 48 hours for an absurd price of $97.)
Discounting can work, but it should not be your primary “go to” strategy for selling.
Follow these guidelines for discounting:
1. Never offer it upfront.
2. Never offer it to new customers.
3. Always explain WHY you’re discounting.
4. Never treat your product like a commodity.
5. Offer it only for a very limited time, and keep it ultra exclusive.
If the entrepreneur can learn this lesson on how to discount right, they can make HUGE cash from the discount hook that drives people into a buying frenzy.
Discounting rarely works when you’re positioning yourself as an expert or top in your industry.
My motto is: it shouldn’t look or smell like a discount at all.
It should not, in the slightest way, make your product look cheap.
(How ridiculous was it that Banksy art worth 5 figures was being offered for only $60? The dude selling it made no money.)
Anti Marketing Manifesto