Or, Why discounts often backfire for small business owners

Ted (not his real name) runs a specialty retail business online. His staff is small but his sales figures, I suspect, are world-class.

I am a huge fan of Ted’s, personally, and of his business, and I am not alone. What Ted sells, I’ll admit, I don’t need, but I try to find ways at least a couple of times a year to convince myself I do need Ted’s wonderful wares, and I spend more than I should at his site, both in terms of time (must drool first, decide later!) and dollars.

This post, however, is not about my slightly profligate ways when it comes to Ted’s online shop.

Ted’s got a zillion Facebook fans, a very large mailing list for his monthly newsletter, where every one of us eagerly await his folksy yet always-on-topic musings, ranks at the top in any search related to his specialization, and no exaggeration, he has The Very Best www (URL, or “web address”) possible, so he must catch every single newbie searching for what he sells. He’s top-of-the-mind with previous customers and prospects, and generates tons of positive word-of-mouth online and off. You just don’t go to anyone but Ted unless you have to. All great, because his specialization is comprised of mainly serious, long-time devotees and newbies who won’t last, just giving it a try. He’s smack-on with both groups and with anyone in between.

This post is also not about Ted’s spectacular online positioning, which is a factor of having been there first (or quite early), being able to project himself as a person everyone wants to buy from (in front of a staff so efficient his customers never consider it anything but “Ted’s business”), and giving wonderful customer service. (You can’t copy that first factor, but the other two, you should be striving for every day. But I digress…)

Ted sends out that newsletter every month, and I love reading it. I love feeling like I have a window on Ted’s world, and I love that Ted keeps reminding me, with gentlemanly subtlety, to go back to his site and drool/ make plans to purchase/ rob a bank so I can afford it every 30 days or so. Yes, this Experience Designer with way too much email and almost no one on her “in” list is delighted every time Ted sends his gentle, “don’t think of this as a marketing message” marketing messages. Like everyone else Ted emails, I can hardly wait for him to twist my arm.

Nice for Ted, huh?

Well, a while back, Ted sent an email that’s been nagging at me ever since. You see, Ted does sales now and then. His customers know when to expect them (on holidays, mainly) and on forums I watch, they talk it up both beforehand (“What’re you going to buy?”) and afterward (“look what I got during Ted’s sale!!”).

One thing they say a lot on those forums is, “I can hardly wait!” But wait, they do, and so I come to Ted’s email.

Ted very gently, and in a very gentlemanly fashion of course, mentioned that his is a small business (which we know, we readers and devotees), and that the last couple of years have required some adjustments to the business (ooh, for all of us in our businesses, Ted! We hear you on that!), and that…

this last is hard to write…

… that he hopes we don’t just wait for sales to buy what we need from Ted. That this kind of shopping habit can hurt small bizzes like his.

He didn’t call us out, but we knew who we were. And I’m afraid the count is probably… close to everybody on Ted’s list.

Well, now, I write to Ted now and then to tell him I hope all is well and to keep up the good work (he is so friendly I feel like I know him), and I thought about writing to Ted about that newsletter. As I say, it’s been nagging me for some time, but I didn’t feel like any email I’d send would be of use to Ted.

Because… I wait for the sales.

Unless I do have a need, which as I say, isn’t usually (because his specialty rarely results in a true, time-intensive need), I wait for the sales. I think of myself as a good customer who tries to deplete my piggybank at his emporium a couple of times a year, but it’s true. I try not to do it at full price. And apparently I’m not alone.

This is a long story to tell you a short moral that I couldn’t fit into an email to Ted, dear reader. Small businesses often find that holding regular sales backfires on them. The Big Boys can afford to do it because they have scale on their side, but we little guys have to be pretty selective. Small businesses who do it regularly find, like Ted, that customers will wait for the sales to do their buying, and without scale to make up for those tiny margins during a sale, the little guys will end up hurting.

Regular discounting leads to customers’ believing that your stuff is only worth the lower price. And why would we pay you more than we believe it’s worth? Because we like you lots?

I wish that were true, for Ted’s sake. But in the meantime, money’s tight.

And I am embarrassed that he’s noticed. I truly am.

But I’m waiting for the sale.

 

Grow and be well,

Kelly Erickson

 

P.S. This post was inspired by thinking about small biz folks I know while listening to Robert Bruce quiz Brian Clark on How to Kick Groupon to the Curb and Become a Local Hero. When Brian speaks I’m always curious to have a listen. The podcast (25-ish minutes) makes some fine, actionable points—though the title oversells the ideas/solutions they offer a bit—it’s still well worth a listen.