“Raaste ka maal saste mein” – Is this the real meaning of ‘Discount’ ??

A casual interaction with a friend of mine led me to writing this Article mindset and thoughts of Startups and the Indian Consumers on  “DISCOUNTS” as a Launch-pad Strategy

While having a word with Nilesh (name changed) this  Saturday afternoon, who is  looking forward to start up his own venture, I asked him how will he attract customers ?

 I was amazed hearing his response. He said “I will offer discount on my products and services for attracting customers during the initial stage of my business”

After hearing the same, I spoke to few more people trying to understanding their strategy to attract customers and believe it or not most of them think offering discount on their products as a logical strategic Launch-pad to bring in business and get noticed

Personally, I disagree with this strategy but on second thoughts decided to carry out a Survey with sample size around 100 people to understand about this notion of discounts.

 I went to the nearest ‘South City Mall’. On interviewing around 75 – 80 customers , I found many customers believe that offering discount on your product might lead them to believe “Raaste Ka Maal Saaste Mein” i.e. your services are not worth what you are charging or you are willing to compromise on Quality by charging less.

Every coin has a head and tail, and if this is the head, the story on other side of the coin is different. 

By the time I completed this activity, I won’t say the Start-ups  are at wrong but the strategy can also become a hindrance for a business.

The question that might pop up here - ‘What are the factors that made me judge that the biggest mistake my young business owners are making by offering discount for their products and services ?

There are many but I would like to share three of them :-

      A)     BATTLE OF PRICE :  By offering discount, the main focus shifts from quality of product to price resulting in a battle of price starts between you and your competitors. If you are in a red sea with deep pocket players, situation favours the deep pockets. To stay competitive, you really need to rely on quality of product rather than price.

      B)      REDUCED PROFITS : The most obvious result of offering discounts. Not only that, if the competitor also strategies Price Matching theory,  and starts offering its product at the same price, the company has to produce the  high quality product with a low price and empty pocket , which further may give an negative impact on profitability margins.

Another aspect can be looked with Inventory Turnover as the factor. If the discount strategy works out and customers are attracted to buy products at discounted price , the moment discount is removed, the same customer may not buy the product which might lead to pile up of Inventory  stock thereby resulting in higher costs and reduced profits.

      C)      WRONG IMPRESSION : Business Owners take a big risk at the time of offering products and  services at lower cost or discounted value. This might cause repercussion inn customer’s mind whether the services provided by a company is actually worth the Price demanded

Would like you all to share your opinion “Does  offering  DISCOUNTS really means RAASTE KA MAAL SAASTE MEIN……???