October 1, 2020 Last updated October 1st, 2020 1,634 Reads share

Should a Startup Business Offer Discounts?

Image Credit: DepositPhotos

Everyone who starts a business does so to make money. But what many do not know is when a business will begin turning a profit. That is why most people assume that it is harder to get discounts from startups that are only just getting their name out. The logic for this is sound, because who wants to lose any money? The opposite, however, is true.

A business that is just starting usually has one main goal: attracting clients. Because all customers for startups are new, they have the benefit of solving the repeat customer problem later. Discounts are a great way to encourage people who have never heard of a product before choosing it over a more familiar one they have already been using. This is a tactic often employed because people are just naturally more inclined to lower prices. Consumers are always on the lookout for ways to save and this is the need that startups can use to their advantage.

In a study from Virginia Tech, it is noted that “Consumers perceive a higher level of savings for a product when a higher price discount is provided.” When two items from different brands are compared, people will be more likely to go for the cheaper option. Since they need to buy the item anyway, it makes them feel that they are actually saving money by making the purchase. For this reason, an introductory price is promoted as a way to build brand recognition over competitors. This starting rate is readily understood by consumers to not be the actual price of a product so they can assume that they are hitting a bargain. Companies must not underestimate the genuine fear of missing out experienced by customers. Once they have solidified their place in the market, they can then proceed to offer a similar pricing scheme to the one used by their rivals.  

Even Coca-Cola, one of the most recognizable trademarks in the world, benefited from the use of couponing. Before it became a popular leisure beverage, Coca-Cola had its beginnings as a patent medicine sold over the counter at pharmacies. It was not originally meant to be consumed casually but for a medical purpose. Carbonated water was a novel thing and unsurprisingly, there were a lot of people who didn’t readily jump to the idea. About a year after the company’s founding, they introduced the first known use of a coupon. The handwritten Coca-Cola tickets gave potential customers the opportunity to try a glass of this new drink that was then priced at 5 cents. The rest, they say, is history.

The more capital is invested in a product, the greater the revenue needed to recoup the expenses. Forbes calls this formula the break-even analysis. According to this, businesses need to estimate how much inventory they need to sell so that they can start earning sooner. The bigger the company that has newly entered the market, the higher the likelihood that they will be spending on marketing campaigns to reach their targets. Professional marketing campaigns are usually executed through different phases and discounting is one of the first levels. This is really a better win for consumers because the quality is not usually associated with cheaper prices.

In a huge market like eBay for example, it is tough for any single brand to stand out from the crowd. This is where marketing in the form of discounts can come in. Since people can filter and browse according to their perceived budgets, brands are placed side by side with their competitors. When two products already offer the same price, consumers will then look to promotions that they can apply. People can enter an eBay discount code or take a discount that the brand is offering at the same time. The decision comes down to which brands offer more generous savings. In this way, customers can choose particular startups over others in the same bracket.

Startups are usually borne from the brainstorm of entrepreneurs who obviously want to make this idea well-known. For older businesses, discounts can be offered when monthly targets have been met or when there are still available funds for marketing purposes. Since startups are more inclined to a bigger budget for publicity, they can offer discounts from the get-go. It is more usual to observe this than to see a famous endorser for a brand new product since endorsements can only offer authenticity after a perceived period of use. 

With these in mind, bargain hunters would do well to keep an eye out for new names they haven’t heard of before. The bigger the campaign effort, the more likely that you will encounter discount codes in ads and website banners. These fresh entries in the market might eventually give you more value for your money and introduce you to a new staple in your life.

DepositPhotos – business discount

Amy Fischer

Amy Fischer

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