Back in my MBA days I remember being taught about price skimming.
The idea was simple.
When you launched a new product or service, you launched it at a premium price, let the early adopters pay that premium so you could recover your development costs fast, and then over time, as sales dropped, you dropped the price to the market rate.
On the face of it, it's a really appealing strategy for experts launching innovative services: sell high, get a cash injection, and then let nature (and market forces) do their worst.
There's only one problem.
And it's probably one you can see instantly…
When you launch high and discount later, you are training your clients. You're training them to wait a few weeks or months every time you release something, knowing the price will come down eventually.
Not a pattern you want to encourage!
Then of course there's the "retail discounting" pattern. you know, seasonal sales, twofers, bogofs…
It seems like a great way to stimulate sales when they start to flag.
The problem is that again, you're training your clients to wait for discounts. And if you make them seasonal they can even count the days til the next big sales event. Hey, you could even send them a calendar with the sales events marked!
Maybe it's just because I don't like competing on price that I don't like discounting.
Or because discounting an old product or service seems like holding up a flag that says "this isn't selling, and I need the space".
It's like a book ending up in the remainder bin at the bookstore.
Either way, there's only one discount pattern that I regularly encourage my clients to do, and that is the EXACT OPPOSITE of price skimming.
The only time that discounting makes commercial sense, and reinforces your position rather than weakening it, is when the product or service is first launched.
You heard me.
Your brand new creation. Your pride and joy. The big secret you've been hiding from the world until it was ready to launch.
If you want to get clients now and book yourself solid, then you need to discount it as you launch it. Whatever "it" is.
Think about it.
It's new and untested. You need to establish some testimonials. You want to get referrals. And you also want people to buy it as soon as possible.
So a limited-time launch discount makes sense.
And telling people that you're doing it BECAUSE you want those testimonials makes them feel like they're being rewarded for positive behaviour rather than just for waiting things out.
EVen better, it trains people to buy before the price rises, rather than waiting for the price to fall.
It's something I do myself.
The Six-Figure Blueprint Intensive workshops I've been running this year all had earlybird rates to encourage people to act.
I've been offering my new Protege Mentoring Programs at a rate 2/3 what they will be in 2013.
It's just good business sense.
So, will you discount your new product now? Or will you teach your clients not to buy from you until the price drops?