Hidden Discounts

Hidden Discounts

Many businesses suffer from hidden discounts and losses, which are either ignored or not even recognised. They come in many shapes and forms, but are often wrapped up in the idea of ‘customer service’. Some businesses have identified these aspects of their business and sell them as a benefit and can even charge more as a result. Others haven’t!

Last week, I was in our local family run coffee shop buying a sandwich. The sandwich had a single price, £2.30. For this competitive price, you could get a basic baguette with filling or could opt to include a variety of salad additions. As everything was added, I wondered how the price was set and if the standard profit was with or without the salad. Indeed, how much filling was meant to go in and how many people got the ‘extra scoop’ because they were regular customers.

In truth, I expect that the shop has never considered costing out the sandwiches and therefore ignores the fact that the sandwich with everything in will cost significantly more to make than a basic one sold for the same price. If they sell only 200 sandwiches costing 25 pence extra per week, this could be a hidden discount or loss to the business of £2,600 per year.

I regularly go to clients where they fix their customers mistakes for free and make special deliveries at no extra charge because, “It keeps the customer happy!” But the same customers take advantage of these “hidden discounts” time and again, whereas the best customers, who don’t make mistakes and collect from the factory get to pay the same or on some perverse occasion’s even higher prices.

  • Does your business offer  hidden discounts?
  • Do you charge the same price to high maintenance customers as you do to those that run smoothly?
  • Do you identify the additional costs often associated with customer service?

For more information concerning hidden discounts and the possibility of grant funding contact Brian Russell on (01661) 872004 or by email: Brian.Russell@profitabilitygroup.co.uk.

About the Author

Brian RussellBrian Russell FCA is a Chartered Accountant with over 30 years of experience working with owner managed businesses in North East England. He formed Russell & Co in 2000 to build upon his experience to provide high quality part time financial directorships for smaller companies particularly in Newcastle upon Tyne and Northumberland. Russell & Co is based in Ponteland.View all posts by Brian Russell →