The Hidden Costs of Discounting.
Table of Contents
2. The Devaluation of Your Brand
5. The Alternatives to Discounting
How Slashing Prices Can Hurt Your Revenue and Brand
So it’s cold, wet, windy and miserable. It feels like your bookings have all but disappeared.
Then you remember last winter you put out a special discounting your most popular tour by 25% and bookings picked up.
I get it, the temptation to discount is strong.
When faced with low occupancy rates, empty tour slots, or off-peak seasons, offering a discount seems like a quick fix to boost sales.
However, while discounting might offer a short-term surge in revenue, the hidden costs for discounting can be damaging to both your brand and your bottom line in the long run.
The Immediate Revenue Trap
Discounting often leads to a quick increase in bookings, which can seem like a success at first glance.
But this immediate boost is deceptive.
The revenue gained from discounted sales is typically lower than what you’d earn from full-price bookings.
See the table below - you need to increase sales by 34% to make the same money at discounted prices when you have a 30% margin.
This reduced income may not cover your fixed costs, such as staff salaries, maintenance, and marketing expenses.
Over time, relying on discounts can erode your profitability, making it harder to reinvest in your business and maintain the high standards your customers expect.
The Devaluation of Your Brand
Perhaps the most significant long-term consequence of discounting is the impact it has on your brand perception.
When customers become accustomed to discounts, they begin to associate your product or service with lower value.
This can lead to a vicious cycle where customers wait for discounts before booking, making it difficult to sell at full price.
Over time, your brand may be seen as “cheap” or “budget,” which can deter higher-paying customers who are looking for a premium experience.
One of the key strategies I had at Aquaduck was to remove all discounts, that way people knew the price and we delivered value in other ways.
The Dangers of Price Wars
Once you start discounting, it’s easy to get caught in a price war with competitors. We have all seen it. When you have multiple competitors and they are all chasing the same customer.
In an attempt to undercut each other, tourism businesses can slash prices to unsustainable levels, damaging the entire market.
This not only hurts your revenue but also degrades the perceived value of the services you offer.
Competing on price alone is a race to the bottom, where no one truly wins.
Eroding Customer Loyalty
Discounting can also undermine customer loyalty.
When guests are drawn to your business primarily because of low prices, they are less likely to become repeat customers. How many times have you gone back and used a business after a groupon offer? I can tell you I have never.
Instead, they may simply chase the next discount, whether it’s with you or a competitor.
Building a loyal customer base requires more than just offering the lowest price; it involves creating memorable experiences and establishing a strong emotional connection with your brand.
Learn how to reward customer’s loyalty here.
The Alternatives to Discounting
Instead of falling into the discounting trap, consider alternative strategies to drive bookings and increase revenue:
1. Value-Added Packages: Offer packages that combine your core services with additional perks, such as a complimentary meal, guided tour, or upgraded accommodation. This approach enhances the perceived value without lowering your price.
2. Loyalty Programs: Reward repeat customers with special offers, exclusive experiences, or early access to new products. Loyalty programs can encourage repeat business and build a strong customer base that is less sensitive to price changes.
3. Seasonal Promotions: Instead of permanent discounts, offer limited-time promotions during off-peak seasons. This creates a sense of urgency without undermining your brand’s value.
4. Experience Marketing: Highlight the unique experiences and emotional benefits of your offerings. When customers understand the exceptional value and distinctiveness of what you offer, they are more likely to pay full price.
5. Differentiation: Focus on what sets your business apart from the competition. Whether it’s exceptional service, a unique location, or an exclusive experience, differentiating your brand allows you to command higher prices without relying on discounts.
Protecting Your Brand and Revenue
While discounting may provide a temporary revenue boost, the long-term consequences can be detrimental to both your brand and your financial health.
By focusing on adding value, building customer loyalty, and differentiating your offerings, you can protect your brand’s integrity and ensure sustainable growth.
Remember, in the tourism industry, your brand is your most valuable asset—don’t let discounting erode its worth.
Want to learn more about sustainable growth strategies? Visit our blog for insights and tips on protecting your brand and boosting your revenue effectively.
For personalised advice, book a call with us today to discuss how you can enhance your brand and drive long-term success.
