Daily, we see all sort of special discounts or bonuses being offered. Whether it's on the fast-growing web or at the grocery store's frozen food section - we're bombarded with some type of incentive to get us to try a new product or service.

I'm not 100% convinced this is an effective means of generating sales. Especially long-term sales. Here's why

What type of people do you attract by dropping your price? Price-shoppers looking for a discount? Or future clients seeking quality?

They switch to your product or service to save $5 or $25then switch back to your competition when the sale is over.

But for the sake of this short article, let us assume that dropping prices is a good way to win customers.

How much should you drop it?

The best way to know is to test. You may find the results interesting.

Many studies have shown that anything beyond a $5 incentive has little effect on response. For example, lets say a postcard campaign is receiving a 10% response rate with a $5 discount. Next run, you try a $25 or $50 discount, but only receive a 12% return. (Hard compensation for an extra $20-$45 profit loss.)

Why is this happening?

My experience is that certain people are moved by a discount (no matter what size). They simply like discounts.

While there are other types of customers who require other motivations to convince them to buy, in fact, discounts may well be a turn-off for them.

Either way, testing and finding out how much of a discount your product requires to significantly affect results can save you $10, $20, $100 on each sale.

Let's try to save a little more

Here's another method you can test that has been proven to produce the same results as offering a discount.

Expose your audience to your sales message repeatedly whether its via a letter, postcard or a magazine advertorial. Continue until it is no longer proving profitable.

For example, let's say an email auto-responder with a $5 discount is earning you a 5% response rate. Without the discount, you're only earning 1%.

Now, try taking away the discount. Mail three to seven different versions of that email, one week apart. You may easily hit the 5%.

Now, emails are virtually free to distribute. But, depending on your medium, repeated exposure might cost more than simply offering a discount. For instance, direct mail might cost you $50-$100 per 100 mailed.

You don't want to spend $200 to save $20?

Or do you?

This is where long-term tracking can become an extremely valuable asset to your business. Again, what kind of client responds to the $5 discount?

You may find that the price-shopper who likes discounts never purchases from you again. But the prospect that did not need a discount places steady orders for the next twelve months.

Let's say you sell a $50 book on home remedies for cats and dogs. Plus you sell other pet products as backend. In this case, you lose $5 with the discount, and maybe another $25 paying for the mailing. The book cost you $20 to produce. So you've broken even.

But then that customer never buys from you again.

On the other hand, if you use repeated mailingsyou may lose $50 to $100 on that first order. But then that customer purchases cat food from you on a monthly basis. By the end of the year, you have grossed $3,000 from that one $100 sacrifice.

The point here: track the 12-month results. Not the immediate pay-off. You may very well be losing where you think you are gaining.