A Winston-Salem dentist asked us last week whether he should drop the price of his cosmetic whitening service from $399 to $199 to fight slow scheduling. The honest answer was no. Once you sell something for $199, the next year's customers will not pay $399 again. There are smarter ways to move slow inventory without permanently anchoring your prices to the bottom.
Why Across-the-Board Price Cuts Are Dangerous
Customers anchor on the most recent price they paid. A 50 percent discount today resets their expectation for what your service is "worth." Even after the recession ends, getting them back to full price is hard. Across-the-board cuts also signal to your existing customer base that they overpaid in prior years, which damages trust on top of revenue.
Better Alternatives to Cutting Headline Prices
- →Add a bonus instead of cutting the price. "Book a cleaning, get a free fluoride treatment ($65 value)." Customer feels like they got more, not paid less. Original price holds.
- →Time-limit the offer with a real deadline. "March promotion ends Friday." Scarcity and urgency move people to act without permanently signaling a lower price.
- →Bundle services. A roofer can package an inspection, a gutter cleaning, and a repair quote for one price. A salon can bundle a cut, color, and conditioning treatment. The bundle has a single perceived price; individual services keep their value.
- →Offer payment terms instead of price cuts. A $4,000 dental treatment broken into four monthly payments of $1,000 with no interest is more attractive than a $3,200 lump sum, and the practice keeps full revenue.
- →Loyalty discounts that reward behavior. Existing customers get 15 percent off when they refer a friend. The discount earns its keep by acquiring a new customer at near-zero cost.
- →Fenced offers tied to off-peak times. "Tuesday morning HVAC service calls are 25 percent off." The customer earns the discount by giving you flexibility, and your peak prices stay intact.
When a Real Price Cut Makes Sense
- →Market reset. If your competitors have all cut by 20 percent and you are losing every comparison, a real cut may be necessary. Be honest with yourself about whether competitors actually cut or whether you just feel pressure.
- →A new entry-level offering. Launching a stripped-down version at a lower price (a basic financial plan instead of a full one, a single-area lawn treatment instead of a season package) protects the headline price of your premium service.
- →Known oversupply. If you have a fixed-cost block of time or inventory that is going to waste otherwise (an empty surgical room, a spa room sitting unused), discounting that specific block to fill it is rational.
The Winston-Salem dentist above kept his $399 cosmetic whitening price intact and instead bundled it with a complimentary teeth cleaning and home whitening kit for new patients only, time-limited to the spring. Bookings tripled in 60 days, the headline price never moved, and the new patients converted to ongoing care.
Read the companion pieces on the 2009 marketing budget decision and loyalty and repeat-customer programs, or have our digital marketing agency design a recession-resistant offer strategy for your business.