Price Versus Incentives

Many new entrepreneurs and a few experienced business people try to use price changes to motivate sales. While this sounds good on the surface, price is something you should take great care in changing. It is better to use incentives to motivate behavior and let price remain constant.

Incentives to Drive Behavior

• The first five customers receive a 50 percent discount
• 40 percent off all weekend on certain items
• 10 percent off for every referral up to 40 percent
• 1/2 price draws of beer from 4 to 6 p.m.

In each case, the incentive has boundaries and attempts to drive a time specific behavior. Another incentive usage is to accelerate payments. In business to business transactions it is common to give a 1 percent or 2 percent discount for paying a bill within the first 10 days of receipt. In each case, the incentive is targeted to a specific result. In addition, the incentive result can be measured and analyzed for future use. 

While some are advocating dynamic pricing, understand that changing prices frequently will lead to confusion and frustration. By leaving the price stable and using incentives to drive specific behavior, you will have a better chance of motivating the behavior you want.