In the last edition of the Leading Learning newsletter we asked subscribers to share some of their toughest pricing questions. Here – with a little bit of editing to remove identifying information – are responses we provided to some of those questions.
1. Does a significant price reduction normally enhance sales? Do price reductions communicate a reduction in the product’s value? We’ve experimented with discounts and sales, but have had worries that it devalues the brand of our courses. We have also not seen great results from the promotions we have ran.
The impact of a discount will depend on how “elastic” demand for a product is, and really the only way to find that out is to experiment. (Elasticity is always historical – there is no formula that can predict it reliably.)
In general, be careful with discounting. Don’t discount unless there is a specific strategic aim in doing so. It is highly unlikely you will “make it up on volume” with any discount you run. Conversely, the “zone of indifference” that most buyers have to pricing changes stretches in both directions – you probably have room to raise prices by as much as 10 to 15% without anyone noticing or caring very much. (See our video on 3 Axioms of Pricing for additional explanation of this point.)
If you do experiment with discounting, limit the time and communicate a clear reason for why you are discounting – this will help address your second question above about perception of product value.
Discounting can definitely impact value perception, so be cautious. Indeed, the better strategy often is to keep price the same, but add value in some way – e.g., a bonus for taking action now – rather than discounting.