The Secret Side of Discounts

In 1875, a spectacled man named John Wanamaker bought an abandoned railroad freight depot and turned it into America’s first grand, dazzling department store.

Like any big retailer, he had to hire more store clerks around Christmastime every year to accommodate the swell of holiday shoppers.  However, all the extra help became unnecessary in January when sales died back down, and so he had to cut his workforce every year right in the dead of winter.  John was a decent guy, and he hated doing this, but the low January revenue simply could not support that number of employees.

So one year he decided to try something new:  He purchased bed linens in bulk and sold them just above wholesale price – the first ever January “white sale.”  People came in droves to snatch up the great bargain, and this blockbuster sale made him so much money that he didn’t need to lay anyone off.  His profits skyrocketed during a traditionally slow season, not only because of the volume of sheets he sold, but because people coming in to buy sheets also bought other things they saw while they were there.  Win-win for Wanamaker!

We can learn something from John.  Namely:

Discounts aren’t about letting customers save money for the heck of it. Discounts serve one clear purpose:  Making money. 

Sure, there are times when discounts are totally appropriate for humanitarian and kind purposes – I’ve seen pet photographers give discounts to people who adopt from humane societies, family photographers give discounts to military servicemen, and so on.  I stand behind you 100%.  I’m all about finding ways to use our skills and businesses to make the world brighter.

But in order to be around to do that kind of humanitarian work, you have to stay in business.  Sure, John could have just let the clerks keep their jobs because he didn’t want to pull the financial rug out from under his workers midwinter.  But he was a businessman, and if he didn’t take care of business first, no one would have a job.  So instead of thinking “oh, I’ll just let them keep their jobs,” he thought “okay, how can I make as much money as possible so that they can keep their jobs without hurting the company?”

We’re photographers.  We like to help people too.  We want clients to be able to afford our services. 

So when someone comes to you and says your services are out of their budget, it is sooooo tempting to just hand them a discount so that you can be nice to them and least earn *something.*  I know, I’ve been there.  But this kind of discounting is different from what John did.  His discounts brought in the money.  Your discounts, when given randomly at clients’ demands, can put you out of business.

Yes, advertised discounts can bring clients in the door.

But here’s the thing:

Unless you are a big store, using big-store discount tactics can hurt your business.

John was selling tons of sheets, so he could afford to only make a small profit on each one.  We’re not like our friend John.  Our services represent a substantial investment of time, and we can’t buy and sell the hours of our days in bulk.  Each hour has to count.  Unless there is a way to cut 30% off the amount of time you spend on each session, slashing your prices by 30% is only setting you up for exhaustion and overwork.

Additionally, if I’m a grocery store and it’s Valentine’s Day, I can buy a bajillion red roses and sell them for $9.99 a dozen.  I’ll do this because I know that most people will also buy milk and laundry detergent at full price on their way out.  The money is being made up elsewhere.

I’m guessing you’re not planning on selling milk and laundry detergent along with photography anytime soon.  So as small businesses, before we slash our prices to get people in the door, it’s imperative that we stop and think:

Am I making the money up elsewhere?

If it’s the slow season and you cut your session fee in half, maybe you’ll be able to put together an enticing canvas wrap package that will make up for the money you lost on the session fee.  Or maybe you spontaneously bring in a well-connected person for a free session because you know they’re going to send all their friends your way, scoring you clients who never otherwise would have seen your work.  Cool.

But when you’re a service provider offering a relatively narrow scope of services and products, cutting prices for the sake of cutting prices can damage your business long term.

Just like the white sale taught people to wait to buy sheets in January, regular discounts on your services will teach clients to wait for discounts.

People don’t need photos done every month, just like they don’t need to buy sheets every month.  If they know you slash your session fee every fall to make up for slumping business, you can bet your britches they’ll wait until fall.  For non-urgent expenses, people can and will watch like hawks for savings.

Discounts can also make your life harder between sales.  It devalues your services and changes people’s price anchors for how much your service ‘should’ cost.  If a haggler knows that you just gave the exact same photoshoot to someone last week for half the price, he or she will only be emboldened to demand that same service for less than full price.

If you feel you absolutely must alter prices to get people in the door, consider these two alternatives to discounts:

• Instead of ‘discounts’, create an entirely new “product” that is sold for a reasonable price.  Make sure that product does not replace your regular services.  Mini sessions are one example – people can get a springtime picture of their child playing with bunnies on a farm for a lower price than a full family session.  However, this does not replace a full family session – if mom wants pictures with her kids, she needs to hire you for a full session.  Creating ‘products’ like this on an infrequent basis also lets people sample your work in a low-risk situation, so that they may be more likely to come back and book a full session. You might consider making the mini sessions unpredictable so that people can’t simply wait for them on schedule – if you did an Easter mini one year, consider doing Mother’s Day next.  If minis are a huge part of your regular offerings, then this strategy may not be for you.  I’m speaking to those who want to get people in the door with a mini, but don’t necessarily want to do them often.
• Give them a deal if they buy in bulk.  For a limited time only, if they spend more than {your sales goal}, they get __% off additional purchases, not a dime before.  People will spend money to save money.  Sales increase.  Woo-hoo!

Whatever you do with discounts, be

1) crystal clear with yourself about how it is going to boost your business.  Is it a strategic move, or are you caving to pressure?  And

2) proceed with caution so you don’t teach people that you are worth less than full price.

Take care of your business so you can take care of people.