The discount trap

The discount trap

Here Peter Hanley looks at The discount trap and how it affects your business and ongoing profit. Your target is a good margin.

Discounting is expensive.

Discounting is expensive but just what does it cost you?

If you discount 15% and have a margin of 40% you need to sell  60% more product to have the same return.

you cut your prices by…

gross margin
20% 25% 30% 35% 40%
5% 33.30% 25.00% 20.00% 16.70% 14.30%
6% 42.90% 31.60% 25.00% 20.70% 17.60%
8% 66.70% 47.10% 36.40% 29.60% 25.00%
10% 100.00% 66.70% 50.00% 40.00% 33.30%
12% 150.00% 92.30% 66.70% 52.20% 42.90%
15% 300.00% 150.00% 100.00% 75.00% 60.00%

That is pretty terrifying and not often recognised. On top of that, your cost of sales increases with staff and extras along the way.

A lot of Food outlets are getting hurt by the home delivery people by having to compete. They the home deliverers take around 35% margin on every sale leaving little for the owner.

Online competition is affecting many businesses at cheaper prices and free delivery. However, it is only part of the market so you can still have the other part of the customer group or even join them and sell online.

Competing on discount is a no-win situation

The discount trap

First of all, there are times to discount.

I use for example when you want to quit slow moving stock or obsolete stock that is not turning over. Get money back to put into faster moving products.

Drawcard products
The discount trap

Discount a special product to bring customers into your premises. You will see the majors do this with a special line at a reduced price when everything else remains at full price.

Out of season products.

Sometimes it is better to clear cash than have the stock sitting around for 6 months waiting for the sun to shine again.

Customers play the discount game.

When you have regular discounts your customer memory kicks in. I will wait for the spring sale, The Black Friday sale, whatever the sale, at a regular period is. They shop for bargains but they buy for personal reasons, brand, Image, how they feel etc

Every time you discount, your bottom line is hurt.

This is a fact of life and when you look at your margin at the end of a period you wonder why the drop.

How a black Friday special saved me 

I have paid a price for a Video program every month for four years us$47. It was a bit steep but good value.
This discount period they offered a Black Friday special at us$29. Now that is a us$18 difference of $216 a year.

I contacted the company and simply stated change me or lose me. They canceled my service for me and I then reapplied at the new rate and I retained all my history. Great customer service and I left wondering why I had not done it years ago.


In conclusion

Discounting increases sales however is it at the cost of disappearing margins and hece net profit. People still buy on value or companies like Apple would be out of business. 
In fact it has been tested that if you offer a similar product at a high and low price most people will pay more expecting a problem.


The discount trap by Peter Hanley

If you want to know more contact me at

The discount trapPeter Hanley

Multi level marketing 

Multi level marketing

People look at Multilevel marketing based on their history with the product.
We have all seen Tupperware, Herbalife, Amway, etc at and think get rich scheme.

A version of Multi level marketing

“MLMs very rarely emphasize the extreme likelihood of failure, or the extreme likelihood of financial loss, from participation in MLM. MLMs are also seldom forthcoming about the fact that any significant success of the few individuals at the top of the MLM participant pyramid is, in fact, dependent on the continued financial loss and failure of all other participants below them in the MLM pyramid.” (Wikipedia)

Multi level marketing 

In this case, Referral, selling or network selling is a more apt description even though it does have the added benefit with levels of income.

A better version  with Annuity Marketing

The new USA based term Annuity selling more aptly fits the bill here. Once it starts to pay it continues to pay for the long term.

While you don’t have any product to sell, a feature of  Pyramid Marketing,   it is limited to just 5 levels of income giving ample opportunity to earn at a recognized participation level.

The purpose of this plan is to encourage others to shop better and for that help, you earn some income.
That income is sometimes very small to start but when added across your Hierarchy it grows very quickly.

Retailers love cashback

The participating retailers love this form of selling because you become a preferred customer as you share the loyalty aspect of the deal. You get paid for loyalty. They get the continuing sales.

There has long been a push between retailers at shopping counters. Woolworths, Coles and IGA being the main three. They all have loyalty and incentive campaigns but go that bit extra to gather more customers.

The Cashback company aligned with Woolworths in part because the one card can be used for petrol, alcohol, all products at Big W and food. This

Multi level marketing covers over 60% of your weekly spend plus you still get all the Bonuses.  Petrol discounts and exclusive offers.

Cashback retailers are those wanting to provide that extra mile in service and to keep you coming back.
Greet you by name and encourage the use of the app.

Imagine the thrill when your Phone based app shows available funds of $10 or $50 maybe even a couple of hundred dollars as your community grows and grows.

No need for embarrassment

There is no need to be embarrassed about pushing a product or having to join in the corporate indoctrination sessions that others push.
You are recommending a way to shop for everyday goods and services and generate a cash reward that can continue to build for years to come.

There is no limit to the opportunity only that imposed by yourself and that is why we offer no guarantees, just a clear direction to make it big time.

The shopping app offers so much that only after using it can you really appreciate the power contained within.

Multi level marketing 

The important feature is that there is no upfront cost, no annual fees, and the opportunity to enjoy a free leased Car if you choose to upgrade to be an Ambassador at just $99.00 inc one time, lifetime.

What should I do now?

What do you do now, ask for your special download code load it on your mobile phone and begin to share?

Put your credit card away, put your hesitation away because just 5 recommendations could see you with an income that helps the family meet the weekly expenses, not just this week but every week for years to come.

Multi-level marketing. There is a better deal.

I have a package to see you rise above the pack, contact me now

Multi level marketing Peter Hanley


PS. You can simply recommend shopping  at Woolworths to turn an income. Ask me how.