The word “Free” in advertising gets attention and maybe that attention also gets you a sale that otherwise would not have happened. But, could it be hurting your long-term profitability? There are circumstances that you need to watch out for to include:
Customers become so use to discounts, that they only buy when offered.
Discounts move the customer to buy today, what they would have bought next month at the regular price.
Asking for discounts become a continual part of negotiations. The “Is that your best price?” syndrome.
One way to avoid giving away the farm is to be aware of just how much money is being given away in discounts. This is easy to do. Insist that all sales be recorded at their regular undiscounted price. The uncollectable discount is required to be accounted for in a separate account called “Discounts Given”. Now you can easily see on your financial statements how many dollars are given away through discount programs.