The Use of Loss Leaders, Discounts, and Promotionals

I don’t believe in giving away the store but there are times when loss leaders and discounts are in order. Loss leaders is product, samples, information, booklets, catalogs, etc. giving away at a loss in order to secure future business. A discount is a reduction in price but not so much that it creates a loss. A promotional item is something useful to someone else that promotes your business.

Many people expect samples, catalogs, and promotional material to be given away for free but they do cost you money. One thing I will say about giving away these kinds of items is that you only want to give them to people who want them. For instance, if you are doing door hangers, use cheaper materials and give catalogs to people who respond. People who receive catalogs otherwise will just throw them out and they are very expensive to you.

Giving away product is similar. It is very expensive to you so I would try to avoid this practice. Samples cost less. However, if you have a very warm sales prospect or very warm distributor lead, giving away an item might be in order. Use this practice sparingly or it may get very expensive very fast.

Sharp discounts should definitely be given to your warm market, i.e. family and friends. In fact, I would sell at cost to your warm market because they will be your best source of word-of-mouth advertising. Smaller discounts can be given to your best customers or those who buy a lot of product.

Promotional items are useful in some cases. For instance, I like to use inexpensive key chains or pens with my company name and web site address. I usually give them to people who ask for information. More expensive promotional items can be given to your best customers or prospects who may mean a lot of money to you. The more useful an item is, the more they are likely to use it and look at it. Still, I would not use it as a substitute for networking or advertising.

One thing you should never, ever do: You should never pay for a distributor to sign up. However, offering freebees to your best prospects is useful, especially to promote good will and to get them to open up to you. I like mailing postcards offering to send them free items to help them with their decision. Now they may call you because they have something to talk about, and that can lead to questions and answers about the business.

Even using freebees to people requesting them, i.e. free information and samples, can get expensive. We used to spend our entire profit from selling products on freebees, and we sold a lot of product. Especially when first starting out it is important to give yourself a business budget and stay within that budget, because you don’t want to find yourself out of business before you even get started.

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