The dumbest practice in business is "discounting." I personally believe that the word "discount" should be erased from the English-language. It should be the number one principle, "Don't Discount!" Every time you discount you are taking your profit and giving it away. What is the point of having a retail price, if you don't use it? There is nothing to be ashamed of about your retail price and people should expect to pay it.

When you discount products or services you are creating a perception that you are cheap. Furthermore, you are giving a signal to potential customers that the price you have on your product or service is over priced because you offer a discount. How can people trust you, if you discount your prices? How can they be sure that you have not overpriced your products? Your business position is vulnerable if you discount. Every time you discount you are encouraging people to shop on price. This practice erodes your base of loyal customers.

Rather than discounting your product, it is far better business to add value. The secret is to add a product or service that has a high perceived value in the mind of the customer. Along with this high perceived value, the product or service should have a low dollar cost to you and your business.

A good example of this is a business that made and sold drapes and curtains for houses. They were at the upper end of the market and instead of giving a discount they used the off-cuts to make matching cushions which they gave to their customers. Each cushion only cost the filling and a little bit of labour. The effect on the customers was dramatic. At the time of receiving the free cushions the happy customers were asked for referrals and a large proportion of them complied. This made the cost of marketing very reasonable and they avoided giving a discount to compete.

Generally speaking, when people who discount are told that it is a bad business practice, they immediately look to the competition and say, "To complete I have to drop my prices."
Quite honestly, that sort of thinking is bad business philosophy.

Work out what would happen if you put your prices up by 10%. Look at your mark-up now. Consider your current turnover, as well as gross profit and apply the increase. What percentage of customers can you lose and still retain the same gross profit?

If you increase prices and cease discounting you may lose a few customers. Those few customers may be the ones that you don't want. They may be complainers, want something for nothing, and then never pay on time. When you consider it in this light, you are probably better off without them.

If you are worried that you may lose too many customers, improve your level of customer service so that their perceived value is lifted.

This is what happens to your profit when you discount.

· Buy at 7, add 40% mark up. Profit is 3

· Buy at 7, add 40% mark up, discount 10% Profit is 2

· A reduction in profit of 33%