Everyone complains i kill the “magic” in things.
A while ago, a fellow PhD student bought a shirt, only to find it on sale the next day for half the price.
He was rightly annoyed. So he devised a plan to get the shirt at the sale price, and asked my help to pull it off. Basically, one of us should return the shirt and get a refund, while the other buys it again at the cheaper price. He wanted us to do it separately so as not to be busted in the act of saving money.
I reluctantly agreed.
Partway through the plan, he turns up with two shirts and asks me to go ahead and purchase them.
When we left, i said, “Dude, who tricked who here?”
“What do you mean?” he asked.
“Well, you went through this entire exercise so you could save money, but ended up spending more.”
He looked confused. “No, i got TWO shirts for the price of one.”
No, in fact, he got two shirts for 130% of what he originally paid…and he spent more money to buy an extra item he didn’t originally need nor intend to buy.
Actually, i’m willing to bet if he went to the sales assistant and said he wanted to return the shirt and buy it again on sale, they would’ve let him without issue. The very act of returning to the store, walking in and seeing what else is on offer, is a net win for the merchant anyway.
I’ve seen countless examples of this sort of consumer logic, where someone spends more money to “save” but actually ends up buying more of what they don’t need while totally convinced they’ve come out ahead. Like they actually “BEAT” the merchant. But the merchant is laughing all the way to the bank.
If you’re a full-time consumer, you can be forgiven for thinking this way.
But as a merchant like me, or as someone who aspires to be a merchant, like you, we have to think different:
Ultimately, we sell a product for much more money than it costs us to produce. Which means, it’s often cheaper to give MORE product for the same money–than to give the same product for less.
Which is why, the silliest thing amateur merchants do when they struggle to sell their product online is to discount it.
Rory Sutherland says, it doesn’t take a genius to sell a product by reducing its price.
People who use discounting as their primarily sales strategy find they make MORE sales than without, so they create schedules around their discounting.
But this is an extremely short-sighted and brand-destroying strategy.
A colleague recently told me he averages one sale per month of his high-end package. However, he discovered that if he periodically holds a 50% off sale, that number easily shoots to two or three sales in a single month.
Since the product is digital and costs nothing extra to produce or ship, even 50% of the original price is a 100% profit. He sees this as a net win, despite making half the money on each sale–because in total, he makes 150% more money.
Naturally, he tries to hold as many sales events as possible throughout the year.
But to me, this is a net loss and here’s why:
Anyone who’s a long-term subscriber of his mailing list–and you’d have to be, to buy such a high-ticket item–quickly learns that sales are held periodically. Rather than buy the moment they find a compelling reason, they’re trained to hold off their decision until a discount is offered.
Not only this, but people who DO put their trust in my colleague’s business and pay full price, feel cheated when a few weeks later, they learn they could’ve waited and paid much less.
Also, my colleague devalues his own product by having such a heavy discount. The discount says the product is in fact only worth half the asking price, and anyone paying more is being ‘cheated’. Offering the discount frequently further establishes this truth.
Meanwhile, the result he observes, of making more sales when he offers a discount, is not due to the discount itself.
In actuality, what’s working are the “sales event” and the “deadline” attributes of offering the discount. Plus, people’s greed in getting something they perhaps don’t feel they 100% need but being able to score a win against the merchant by spending less on his product.
My colleague could simulate the exact same buying triggers without the pay-cut, without punishing the customers prepared to pay full price, without devaluing his product, and without rewarding discount shoppers for waiting to buy.
All he has to do is create a “sales event” in which he GIVES AWAY MORE product (for the same price) to anyone purchasing before a deadline.
It costs significantly less to produce, for example, a second add-on product and bundle it, than to slash its price.
Plus, the cost of producing a second product is paid ONE TIME per sale event–while a discount is a cost my colleague pays on every sale he makes.
To the point, he could afford to extend the offer of the second product to all past customers if he wanted, without loss–something he could never do with the discount.
Increasing the “amount” of product a customer gets for their money increases the customer’s perception of value. The customer still feels he scored a bargain–while paying the SAME money. And as can be seen by friend’s shirt-shopping adventure, consumers are happy with this sort of thing.
Meanwhile, this is a net win upto 3x what my colleague makes in a non-sales month.
Which could in fact be further increased simply because a second product might appeal to a new set of needs and desires not covered by the original product on its own. Meaning, he might well make MORE sales at full price because he successfully increased the desirability of the product.
That’s something you can’t mimic with a discount.
And if you’re paying for ads and you’re barely breaking even–making three, four, or more times the money can be the difference between staying in business or dying with everyone else.
If you’re building a list, the way i teach you in the Super Traffic Machine…you can EASILY turn around a “losing” or “break-even” campaign by holding intelligent sales events where you actually make SIGNIFICANTLY more money…
In fact, the entire premise of the Super Traffic Machine is to increase your revenue while holding costs fixed–by building a list, selling multiple products to it, and creating repeat customers. Which is how you create lots of net wins and constantly, constantly build profit on profit.
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