Tuesday, January 24, 2012

To Discount or Not To Discount?

If one word ruled 2011 marketing, it would be "discounts". From Groupon to LivingSocial to a dozen-plus other options, business owners had the chance to draw in new customers...but at deeply discounted rates.

Discounts are a fine-edged sword. Many business owners worry that discounts and/or participating in a program like Groupon bring in "low quality" customers: customers who might come once (at the deeply discounted rate), and then never come back again. What's more, these "low quality" customers often suck up time, energy, and effort the business could be spending on "high quality" customers.

So are these programs worth it? The answer, of course, is "it depends."

Here's one business's success story with a low-rate program, one that produced unexpected positive consequences.

The Wine Country Inn is a high-end Napa Valley boutique hotel. It has 24 rooms and five luxury cottages. Guests come from all over the world to stay at the Inn and experience all that the Napa Valley has to offer. The Wine Country Inn had great occupancy during its "high season" -- during the harvest months of September and October, and during holiday weekends. But as with almost all businesses these days, it is continually seeking ways to book business during the off-season and during weekdays.

After much consideration, the Innkeeper, Jim Smith, partnered with LivingSocial to create and then offer to LivingSocial members a Wine Country Inn-specific offer for December 2011 - March 2012. Here are the good things that have happened to date from this LivingSocial program:

* The Inn sold more than 100 of the LivingSocial special offers, driving business to the Inn during the very-quiet months of December and January and beyond.

* Yes, the LivingSocial guests have been younger than the Inn's traditional guests. But this has led to several benefits:

~ These younger clients, having loved their stay at the Inn, are highly likely to return at later dates, when they are more financially well off (and at regular rates).

~ These younger clients are much more social media-oriented. The Inn's Facebook "Likes" have jumped dramatically, as has the number of people who have "checked in" via Facebook. This offers the Inn a great opportunity to expand its Social Media marketing efforts over time.

~ These younger clients are promising to tell their friends about the Inn...and also their parents, who ARE the Inn's primary demographic market.

Utilizing a discount program must be done carefully -- you don't want to de-value your offerings, or attract only "discount seekers". But as seen with the Wine Country Inn, partnering with the appropriate partner can generate new revenue and new customers, and lead to positive unanticipated results.