When retailers hold a big sale, our first instinct is usually to jump on the deal before it’s gone. We are more compelled to buy things on sale than the full-price. The obvious reason is that we save money, but what else is motivating us?
In this whiteboard session, Chris breaks down why discounting actually doesn’t work, and what you should do instead to trigger sales.
The number one reason why you should never get discount to get sales is to avoid setting expectations for your customers. Chris explains that by discounting, you’re inadvertently establishing a pattern of behavior in customers.
Think about Fourth of July, Black Friday, and Christmas sales. At this point, we’re conditioned to expect the best possible prices when these holidays come around. Everyone expects a good discount, and will hold onto their money if they don’t receive it.
When customers see that prices have been reduced, there’s an order of events that take place to lead them to buy. The very first thing they do is anchor the price. They compare the discounted price to the original to determine whether or not it’s a good deal.
Then, the timing kicks in. If it’s a holiday sale, for example, there’s only a limited amount of time for them to get the discount. “FOMO”—or the Fear of Missing Out—starts to kick in here.
On top of the time scarcity, there’s also a quantity scarcity. How many times have you shopped online, added something to your cart, and been told there are fewer than 5 of the items left? Combine the FOMO with the limited quantity, and you start to feel the pressure.
This sense of urgency is what compels people to buy. It feels as if there’s no time to waste. We have to make a decision based on the price, window of time, and quantity available.
What’s the right way to trigger sales? Have a reverse sale. Rather than discount a product, raise the price of it.
Here’s an example of the reverse sale: our Typography 01 course was originally $149. Chris, who authored the course, knew that it was worth more than that, but kept it at that price point for some time. Eventually, he decided to raise the price of enrollment to $299. But rather than leave customers in the dark, we held a reverse sale. We announced to our entire email list that the price would be increasing, and to grab the course before we applied the 50% markup.
In just 24 hours, we’d done about $16k in sales. Why did it work?
Well, we applied the anchor. We gave customers the chance to compare the current price with the new one. We created urgency in time. And we encouraged customers to make a decision before they missed their chance to save.
Whether you’re negotiating with clients or selling a product, try the reverse sale concept before discounting.
Specifically with clients, let them know you will be increasing your prices at a certain time, and that if they want to work with you while you’re “inexpensive” and before you expand your services, time is of the essence.