The case against discounting

When Howard Wein moved to Philadelphia in 2004 to open a boutique steakhouse called Barclay Prime, he knew he needed to offer more than good food.


Because over 25% of restaurants fail within 12 months; 60% in the first three years.

They fail for many reasons. Expenses are high. There’s an army of competitors. And, it’s tough to get people through the door regularly.

Wein’s solution?

A $120 Cheesesteak!

Yes, really. He took the steak sandwich to a new level—we’re talking wagyu beef, truffles, truffle cheese, truffle butter, and foie gras—then added a premium price tag.

And it got people talking.

The cheesesteak generated so much buzz it was featured on USA Today and The Wall Street Journal. David Beckham ate one. Barclay Prime’s executive chef was asked to cook one on The Late Show for more than 3 million viewers.

Of course, the sandwich wasn’t only a showpiece for Barclay Prime. It helped the restaurant thrive. And what the Barclay Prime Cheesesteak demonstrates is that…

You Don’t Have To Slash The Price Of Your Product To Sell It!

In fact, you should consider doing the exact opposite.

Here’s why: it’s usually easier to convince someone to spend $300 than $30.

People will buy a $50k car with barely a thought, then drive 30 miles out their way to get a 2-cent discount on a gallon of gas.

Mental… but true.

The $120 cheesesteak also shows that people judge a product on its price. They are not the subject experts, so they assume that the higher priced option is better.

In other words, a product which costs more than average is considered to be above average. And, a product which costs less than average is considered less than average.

You know, the obvious conclusion to draw from this information is that you should test higher prices.

But it’s also a strong case against discounting.

Over to the late great Claude Hopkins to explain why:

“Before a prospect is converted, it is approximately as hard to get half price for your product as it is to get the full price for it.”

So why, then, is discounting so commonplace? Honestly, I don’t know. But I reason that cheapness (in the form of a discount) is appealing. In other words, we all want to buy things for the lowest possible price.

And discounting has its place.

Case in point:

In his superb book Ready, Fire, Aim, serial entrepreneur Mark Ford recommends discounting as a strategy to bring in lots of new customers at once for a small business.

However, he then goes on to explain that discounting is generally a challenging and problematic way to grow a business.

“Most products…” he explained, “… should be sold by emphasizing their qualities and benefits.”

The reason why is that, although cheapness is appealing, it’s not a strong appeal. Plus, if you rely on discounting, your market will come to believe that your product is low in price, and thus low in quality. Then they will only pay your discounted price.