Which is better: discount or premium

[prova.fm]

Does anyone have experience with either of these promotions:

Discounting your product's price
-or-
Offering a premium

I've been doing some marketing reading & the author's experiences always talk about adding a premium to your sale (He's in sports, so instead of discounting/giving away tickets, he offers a free game ball valued at $75). He states the club was struggling because they were giving away free tix.

I've got a new service, & I want to give some benefit to my initial customers. I could either offer a free listing ($40) or provide 1,000 free postcards to each customer (costs $30, valued higher). I think the free postcards is better, but some of my customers don't need postcards, so I want to come up with an offer that everyone could use (everyone who's in the market for an advertising design).

So does anyone have experience on which is better?
Thanks,
-David

[vangogh]

This isn't from experience, but I'll offer some general thoughts. I think the idea to go with a premium over a discount is in what each word conveys. Discounts naturally mean a savings which is always appealing, but lower cost might also put the idea of lower value in mind. A premium on the other hand is associated with the opposite. You're getting more with a premium and so the perceived value increases.

I would think which would work better is going to be based on your product and market. Are people going to be buying based on price or value. If your market is going to shop on price only then offer a discount. If they're going to shop on value then offer the premium

In your case my guess is offering the premium will work better. Maybe some people won't need the postcard, but they are still going to see it as getting something more. With the free listing you may be attracting people who aren't likely to buy from you later.

Ultimately you're going to have to try to see which works and both are the kind of thing you can offer more than once. Try one now to see how it goes and maybe try the other in a few months as well. If I had to pick one I'd go with the premium, though.

Is there another premium offer you can come up with and give people a choice. Maybe free business cards?

[KristineS]

We've tried both over the years, and my experience has been that what matters more than what you're doing is the perceived value of what you're doing. Whether you're offering a premium or a discount it has to have value to the customer, and only the customer can determine what that value is.

In your example, you talk about offering a premium that would consist of postcards. For some customers that would be a huge motivator. For others, as you rightly pointed out, postcards wouldn't tip the scales at all because they don't use or need postcards.

A free listing is also a little dicey especially if your site is just starting out and not well known. If you give someone a free listing you want that listing to prove so valuable that the customer decides to pay so they can continue to be listed. If your site is just starting out, you might be better off offering your customers a premium.

I hate to say it, but the only way to really know what works is to test an offer and see what kind of response you get. We've done some specials that I thought would go no where and they went gangbusters. Then there have been others that I thought would go through the roof and customers have been totally uninterested. It's really a matter of trial and error.

[dbelmont]

Does anyone have experience with either of these promotions:

Discounting your product's price
-or-
Offering a premium

snip for brevity

-David

Once uipon a time I worked as a motorcycle salesman (long long time ago)

This was what you would call a chop shop since it was all used bikes and. Plus parts and accessories. The owner always believed and proved that you could do more with stuff then money. They may say they like money but they'll really go for stuff.

Among it's many virtues is that stuff that is smartly purchased does not cost you as much as the perceived value to the customer.

Plus stuff has a longer lasting impression on the client IMO. You give them a discount and they mentally adjust to that new price. Tey don't dsay in their mind that they paid XXX.XX but got a YY disocunt. But if you give them that they perceive as valuable when they talk of your service they'll say "I paid XXX.XX but I also got this free ?????. I think it even makes folks talk up your service to others if what you give strikes the right chord with the client.

But whatever you give for a premium make sure it is serving your purpose. You need to make them earn it or reach for it.

Again with the motorcycle analogy. You wouldn't just drag out the premiums until you met with some sales resistance. Use the premiums to increase the value and to get those who are dragging their feet to make that purchase.

What you don't want to have happen is make your offer. Throw in the premiums and then have them walk away. You have to build the urgency and the fact that the premiums are of a very limited time nature. Otherwise they aren't doing their job of helping you close a sale.

I'm fond of gift certificates to restaurants. For which I've made a deal for before hand. These are good becasue you can be flexible by having different ones to different places. And if you make a good deal you won't have to pay for them until someone buys from you. So your investment only happens when you make the sale. Keeps your cash flow under control.

There are tons of other things to use depending on your ingenuity. The more you have the easier it is for you to respond with something that the customer in front of you sees as valuable.

And of course my favorite point. The whole thing needs to still be profitable for your company. Doing so mch that you no longer cover costs is financial suicide.

Don Belmont

[dbelmont]

ALmost forgot this one about premiums.

Whatever you're using as a premium you must believe it is valuable and act like it. I've seen people who act unimpressed by the very thing they are trying to use to entice the sale.

If you believe it and act like it then your cusotmer will as well.

Don Belmont

[vangogh]

The whole thing needs to still be profitable for your company. Doing so mch that you no longer cover costs is financial suicide.

Good point. I would add that you can take a loss on a specific promotion if it leads to more profit overall for your business. For example giving away the first month of a recurring service. You would probably take a loss on that first month, but if it led to enough people continuing with the recurring service it would still be profitable overall.

But overall, yes, I absolutely agree you have to set things up so they're profitable for your company.

[Spider]

Why either/or? Do both!

Car companies do it all the time --

0% financing or $4,000 rebate.
Free carwash or discounted oil change.

What's your business?

My dentist offered me No interest payments over three months for a major procedure or free teeth whitening.

My chiropractor offered Free Xray or discounted program of adjustments.

My local bookstore offered "Buy more than 5 books and have one more FREE or take a 10% discount on them all."

The nice "salesy" thing about giving a choice, no matter what the customer chooses, he chooses to buy. It's a super sales-closer. They stop trying to decide between Yes and No, and decide between This or That.

[vangogh]

The nice "salesy" thing about giving a choice, no matter what the customer chooses, he chooses to buy. It's a super sales-closer. They stop trying to decide between Yes and No, and decide between This or That.

Great point. You take away the choice of no and it becomes that much harder to choose to say no.

[Paper Shredder Clay]

I think more companies are starting to find out that you have to offer both. You need to offer bare basics to some customers, while providing premium services to others. Its how the world runs, you have some always wanting the cheapest and you have some that are willing to pay extra for premium.



Does anyone have experience with either of these promotions:

Discounting your product's price
-or-
Offering a premium

I've been doing some marketing reading & the author's experiences always talk about adding a premium to your sale (He's in sports, so instead of discounting/giving away tickets, he offers a free game ball valued at $75). He states the club was struggling because they were giving away free tix.

I've got a new service, & I want to give some benefit to my initial customers. I could either offer a free listing ($40) or provide 1,000 free postcards to each customer (costs $30, valued higher). I think the free postcards is better, but some of my customers don't need postcards, so I want to come up with an offer that everyone could use (everyone who's in the market for an advertising design).

So does anyone have experience on which is better?
Thanks,
-David

[jrobconsult]

Why either/or? Do both!

Car companies do it all the time --

0% financing or $4,000 rebate.
Free carwash or discounted oil change.

What's your business?

My dentist offered me No interest payments over three months for a major procedure or free teeth whitening.

My chiropractor offered Free Xray or discounted program of adjustments.

My local bookstore offered "Buy more than 5 books and have one more FREE or take a 10% discount on them all."

The nice "salesy" thing about giving a choice, no matter what the customer chooses, he chooses to buy. It's a super sales-closer. They stop trying to decide between Yes and No, and decide between This or That.

Normally, the premium has worked better in my experience. However, having a choice should be worth testing to see how it does and to get better information what your customers prefer.

[vangogh]

What's interesting is some people will prefer premiums and others will prefer discounts. Depends on the person and their current situation. The idea of offering a choice is appealing. On the other hand the more choices the less likely someone will make any choice.

[orion_joel]

I think that is possibly a key point Vangogh. Giving to many choices can inevitably add that fourth choice of i will think about it.

While in the right way giving a choice can help to increase your sales, it can also place another barrier there for people to buy. For example " Buy 5 books and get another free OR get 10% off" Some people will get confused by this as to which is giving them the better deal. Yes the math is quite simple, 5 books at $20 each is $100 and get $10 discount (10%) or another books free $20 free book (if the same price). I know more then a few people that would find this to confusing and probably not buy rather then try and work out which is giving them the better deal.

I think the other key point is that premium should be adding value, rather then just discount in another form. Going with the above example, 10% or a free book are really just two forms of discounting. A way to add value to the transaction, might be purchase 5 books and receive a free Book light (value $24.99). The booklight may cost you only $10 when you buy it but if you sold it you would sell it for $24.99. While not everyone wants a book light, it serves a purpose where someone who is buying 3 books may buy 5 to get the book light. They may not do it to get a discount or additional book.

The key i think is offering something different all the time, not everyone wants the same things so offering something different serves more different customers with potential options.

[vangogh]

iving to many choices can inevitably add that fourth choice of i will think about it.

It's the reason you don't see the highly focused landing pages trying to sell a single product with any kind of navigation. Each navigational option adds one more choice that isn't buying what the page is selling.

I do, however, think Frederick's suggestion a few posts back of offering either the premium option or the discount is a good one. You offer a choice of two options both of which lead to a sale. It comes down to how you phrase the question. There's always the third option of not choosing either premium or discount, but by phrasing your offer well you eliminate that option in the mind of the customer.


I think the other key point is that premium should be adding value

Absolutely. I see a lot of premium offers where the premium part doesn't add anything. The same is true for the discount. It has to actually offer a real savings. If you stop and do the math on a lot of discounts the savings is next to nothing. 10% off on a $10 item is only $1. Not exactly a huge discount. You also want to make sure to do your math right. I've see offers where the discount on buying two items actually cost more than buying the items separately.