Published by Niall Devitt, Btb Business Training

Jonathan Farrington wrote an excellent post, on why smaller companies are well positioned to do well in the year ahead. In it, Jonathan describes the factors that give a smaller company an edge including:

Not being weighted down by unnecessary bureaucracy

An ability to make decisions quickly

Being more capable of building stronger, sustainable relationships with customers

Jonathan goes on to talk about why 2009 will be the year of "Customer Focus" describing what is meant by the term, and why it creates competitive advantage.

I agree that smaller businesses can bring significant advantages, but as with any strength, used incorrectly these same advantages can instead become weaknesses.

This is especially true when it comes to discounting and smaller companies. Under the current pressures, smaller companies are much more likely than larger companies to offer "One Off" or "Exceptional" discounts.

By definition, these types of discounts are:

Rarely planned, are motivated by fear of losing and are offered out of desperation.

Any small company that is considering offering more discounts needs to first weight up how this is lightly to impact the business. It is easy to calculate this impact in terms of profit per sale, what is much more challenging is to predict the longer-term results of one off or poorly thought out discounted.

This is particularly true when you consider the psychological aspects to discounting.

Before offering discounts, smaller companies need to first ask:

What precedents are been set for both our customers and our employees?

What impacts, either positive or negative could result?

I am sometimes accused of being anti-discount, which I am not. Discounting can work successfully to improve the competitiveness of a smaller company, but this is in the minority rather than the majority of cases.

The main concern I take with a smaller business discounting, is that it often re-active rather than planned. I say this, because where and when discounting works, it is part of an overall business strategy, not a knee jerk reaction to a set of circumstances.

Your small business may be well positioned to adapt, compete and succeed in the year ahead and good luck to you. But when customers come calling, which they will for more discount, my advice, think before you act.