It occurs to me that running a business would be much easier if we all played by the same rules. If we all used the same terms and if we all had the same specifications.

If this were true, then it would be a matter of skill and creativity, combined with quality of products and quality of labor, that would separate us from each other. Sadly, this is not true.

Marketing, advertising, social media, and the Internet create both knowledge and confusion in us all, and providing a discount to a customer may be appealing but it can promote even more confusion.

Discounting can be an effective method to help “make the sale,” and I have talked about the positive and negative impacts of discounting in these articles and in my talks at the Closets Expo. I encourage you to be careful and understand, really understand, what the impact is to your business when you provide a discount.

I believe transparency helps us all understand better. Keeping this in mind, I deconstructed the discounting metric and break down the different types of discounts that are typically offered. This is not an all-inclusive list but a good representation.

The Real Discount: This discount is just what it says. However, you calculate your selling price and determine the price that you want to end up with to earn your normal margin/profit on the job. Then, you lower the price to your customer, knowing you will make less profit. This could be a percentage off, dollar amount, or a free upgrade or accessory.

The Tradeoff Discount: This discount is when both you and the customer get and give something. An example could be a discount if they pay by check rather than a credit card. Or, the customer pays for the job in full to get a discount.

The Marketing Discount: The price is higher to begin with, then lowered to the normal selling price. Often, this is referred to as the “Mark it Up, to Mark it Down” pricing structure.

The Fact Finder Discount: There are times you might want to try different discounts or offers to learn what gets the best response. Advertise 10% off in one location and 20% off in another location, and then offer a Free Color Upgrade somewhere else and maybe $200 in Free Accessories somewhere else. Or, use each in the same location over a period of time.

The Sham Discount: This can be taking advantage of the customer not knowing or understanding the difference between your design & products and a competitor’s. For example, a stack of shelves. Most of us use three fixed shelves and four adjustable shelves, and a toe kick if it is a floor-based system. The sham is using two fixed and three adjustable shelves.

In the end, there are only a few ways to lower the cost and really be able to offer a true discount to a customer:

Lower the quantity of what is included, such as long hang versus a stack of shelves, which has a lot less shelves.

Lower the quality of the material, as in self-closing drawer glides, or 1mm edgeband versus .05 flat tape. Think about IKEA, their material is much lower quality, but they make up for it in superb engineering. Think about the different pieces of hardware required to assemble their products. The hardware/engineering holds the lower quality material together.

Another way to lower the quality of the material is the color upgrade. The color white is the most popular and least expensive, and we understand that an upgrade to a color costs more. But many colors are available in a flat finish and a textured finish, and a customer may not know or understand the difference.

Finally, you can lower the quality of the people that do the installing. We know that some of us pay an opening wage, and some of us pay quite a bit more, and that contributes to the quality of the installation.

When a customer says, “The price is too high,” my response is always the same: first, what would you like to remove? Usually, this leads to the second comment, “price comes down to three things: Quantity, Quality, and Profit.” Lowering prices WILL lower one or all three of these.

As I write this article, I thought of the concept of the “neutral third party.” I am, and this magazine is, a neutral third party. We want you to succeed, and we want to help you on this journey, but we are not there with you or know how you work and operate your business in your market. This article may be a good one to turn into a PDF or place on your website and share it with your customers to help them make well-informed decisions.

After all, don’t we all want our customers (family & friends, too) to be as enlightened as possible?