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Small-business Advice: Prudent Discounting

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Meanwhile, for this first post, we’d like to highlight a story we found online at BusinessWeek by Steve McKee that [discusses] the potential downside to discounting. In recessions like the one we’ve been facing, your customers may be strapped for cash, and you’ll be tempted to cut prices to boost sales, but McKee notes that excessive discounting can actually wreck brand value and plunder your profit margins. So how can we discount smartly? McKee suggests limiting discounts to specific time periods or certain customer groups (i.e., students and seniors). Another option, he points out, is to adjust your product mix—carrying lower-priced products but not slashing the prices on your high-end items.

We’d love to hear about your experiences with discounting. How have you used discounts to stimulate sales while protecting your brand and your profits? Or do you have any cautionary tales about the risks of customers who get hooked on discounts and soon refuse to buy anything that’s not on sale?

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