Hey y’all. Hope you had a great Thanksgiving weekend. We did too. We went on a team retreat and reflected on how things went for the past 6 months. What was different this time was, we weren’t constantly checking our phones as to how the Thanksgiving sale was going. Because we had no sale running this year.
Lately, we have been building strong convictions with how we see business. A major learning is not to have any sort of discounts (except of course for non-profits and students). There are a few factors that drove us to this decision.
Value Exchange
When we decided on the pricing of addons, we carefully analysed the development, maintenance and support costs involved for each addon and made sure our customers get a fair value for the money they are spending.
But when we give discounts, there is a conflict with our belief of fair value exchange. If we are giving an addon for a lesser cost, we are indirectly communicating to our customers that the value they will get out of it is lower.
Being Fair
We used to give discounts to users who asked for it. But we soon realised that we were being unfair to users who paid the full price.
How would you feel when a friend says that she got the Addon Suite with a 20% discount, after you purchased it for full price? I would feel foolish and cheated. More so, as a company who doesn’t invest in marketing and solely relies of word of mouth of satisfied and happy customers, we need to be fair. Every one gets the best price.
Customer Loyalty
Our most treasured possession is our customers’ loyalty. The loyalty of customers who renew their licenses year after year. But only recently did we understand how badly we have been destroying it by giving away discounts.
Our customers’ loyalty is something we have earned over the past 2 years. A customer chooses to stay with us, with or without having tried our competitors’ product, because the value they get out of the transaction makes complete sense to them. But when a customer asks for a discount, what he’s actually says is, “I like your product. But I don’t think it’s really worth as much as you are asking for it. Can you sell it to me for what I think it’s worth? If not, I’ll move to…” Nah. I don’t think so.
Going forward, I think, not giving discounts will be a great filter to attract the right kind of customers who see real value with our products.
Undesirable Outcomes of Thanksgiving Sale
Inadvertently, we trained our users to expect and buy with a discount during Thanksgiving. This had a few undesirable outcomes.
- Customers hold off purchases until the holiday season. I am sure we have lost a few opportunities to serve more people this way.
- They purchased addons that they didn’t really need, but they thought would be nice to have. At a deep level, this wasn’t ok with us. If I purchase an addon that I don’t really need at a discounted price, it’s perceived value will definitely be less.
- In the last 2 years, when we ran the Thanksgiving sale, our sales graph was something like this.
The sales volume spikes during the Thanksgiving weekend and is usually 2–3 times the average monthly volume. But after that there is a huge dip and it takes around 4 months to recuperate. This was not a sign of a healthy business and definitely not how we wanted ours to be.
So, that’s how our belief with not giving discounts came to be. We have had a few changes recently with our business convictions. I will keep sharing them with you as it happens. Let me know what you feel about this decision of ours in the comments below.
