The class discussions on pricing got me thinking about special offers and discounts that many companies conduct in order to increase profits. I came across Jim Connolly’s blog “What everyone ought to know about special offers!” As an avid coupon hunter, it was interesting to read about the positives and negatives that discount pricing may have on a company.

What I took most from the article were the 4 things that need to occur for a discount price to be rewarding for a company: specialty, scarcity, targeted, and timed. Pricing can be a challenge a company, especially when it has to make sure it is line with it’s company objectives, customers, competition, costs, and channel members. Often times with discount pricing, the company has a sales orientation objective – to maximize volume. However, that might not be the way that customers gain value from that company. Is the good or service special? Rare? How tailored is it to meet my needs? Can I get discounts on it all the time so I never have to pay the regular price?

Discounting often seems like the easiest way to get rid of excess inventory but it is important not to set that expectation in a consumer’s mind so that they refuse to buy any product of yours for the regular price. Before pricing, it is important to look at previous trends in company history, as well as the 5 C’s. Maybe your product is more specialized and thus, does not need to be priced low because it adds value to the customer and is of good quality. Perhaps you are the only company selling your good and have a monopoly over this product or service, and thus, you may be able to sell for a higher price. If you are in perfect competition, maybe it is better to specialize in something else in order to make positive economic profits.

Thus, it is crucial that companies analyze the big picture as a whole. Looking at the 5 C’s will enable a company to accurately price and not set expectations that they cannot make which would decrease customer loyalty. Pricing is so important for a company and it is a matter of doing it right!