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Discounting a Price to Close-Out Inventory

saleYes, you can discount your price as a way to close-out inventory or to get out of a particular business.  Nothing wrong with that, if it makes sense as a way to free up resources you can then use somewhere else.

Before you race out with a discounted price to help you out of a short-term problem, ask yourself what impact the discounted price is going to have on your regular business.

Just because finance says to drop the price to get rid of old inventory does not mean you should do it.

When you drop your price to get out of a business, it’s important to stop and think about what this says about the price you had been charging.  By dropping your price, you’re telling everyone who bought at full-price that they overpaid.  Argue all you want about how this is a “close-out,” but sorry, it doesn’t validate the person who earlier paid full-price.

When you discount your price to close something out, you run a huge risk of altering the price/value relationship of what you have created with your customers.

This can have significant implications going forward.   Suddenly, the lure of having the close-out pricing can go from being the smart thing to do to now being the dumb thing to do.

What is even worse is by doing a close-out sale, you are most likely already cutting your margins significantly, all for the sake of freeing up resources. In my book what you’re doing is risking your long-term business all for the sake of a quick volume surge, but at a lower margin.

If you must discount your price to do a close-out of some type, do it in a market, industry or area separate from your existing customers.  In this manner, you can still liquidate the inventory without putting at risk any long-term price/value relationships.

Copyright 2013, Mark Hunter “The Sales Hunter.” Sales Motivation Blog.

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