Offering items at a sale price is a very tempting tactic. In the short term, it drives traffic and sales. What you lose in margin is made up in volume. Problem solved, right?!

Bigger problem, created. What you’re really doing is eroding your long-term margins and your long-term sales. (This is especially true if you run a business based on quality and value versus being a low-price provider.)
The problem with discounts is that customers don’t see the price drop the same way you do.
As a business person, you clearly understand you are temporarily cutting into your own profit to give a little more to the customer and keep their business.
As customers we see it different. The moment you discount, it re-calibrates the perceived value of your products/services. Selling something for $200 today, and discounting for $150 tells us you are making more money on the $200 version… And you’re still making money on the $150 version… so the $200 version was over-priced. The new perceived value, $150.
As a consumer buying something, we get this. As a marketer selling something, we tend to ignore this fact.
When you see an infomercial and they tell you you’re getting a $199 value for only $49 do you really think you’re getting $199 worth of something? Heck, no. In fact you know that may be a sucker for paying the 49-bucks.
Starbucks Coffee used to host their Annual Brewing Sale at the stores. Each spring they would put coffee and espresso machines on sale. “Lowest Prices of the Year!” the signage declared. As a customer you’d save between $50 to $200 on a brewing machine. So instead of being priced at $250, the brewer was on sale for $200. Instead of being $700, the automated espresso machine would be $500.
Well, guess what… customer perception became, if Starbucks could sell items for the lower price of $200 and $500 that must be their value. Customers stopped buying year-round and waited to buy ONLY when Starbucks had the sale. You’d be a sucker to buy it when they were not on sale.
While the ring of the cash register sounded good, Starbucks made no more money in the rush of machines sold at SALE prices than they did selling them at a fixed prices all year. (Furthermore… by having a once-per-year focus on the machines, the store employees didn’t have brewing machine knowledge. As a result, today you can get a better explanation of coffee equipment at a general kitchen store like Williams-Sonoma than from the coffee expert. Discounted machines hurt the brand.)
So what should you do?
First, if customers are complaining about your prices, make sure you actually aren’t charging too much. Compare yourself with your competition. Recession or not, if you were already dramatically out-pricing the competition without a dramatic difference in quality or service, perhaps you should consider lowering your prices. (I’m not recommending getting yourself into the low-price game, just make sure your higher prices offer higher value.)
Second, instead of giving away money, strategically provide add-on services or products. Instead of discounting the price of a hair cut at the salon, give away a bottle of that great shampoo you used that made my head tingle and hair smell so great. Instead of cutting the price of your website building services, offer a complimentary, 6-month, search engine optimization (SEO) service.
This accomplishes two things… (1) You don’t erode the cost of your base product. (2) If you do it right, you offer customers things of value that they may never had tried before. You’ve created a strategic win-win. As a customer, I feel good for receiving something of extra value. As a business, you got your customer to try something new. The customer may start buying that shampoo on a regular basis, or continue to subscribe to your SEO services.
Recession or not, more than likely your customers can still afford to pay full-price for what you offer. In times when their being ultra-conscientious about spending, they want to make sure it is still worth their while providing value for the money. If they’re considering whether you’re still *worth* it or not, perhaps you weren’t providing the experience you promised in the first place.
Long story short, discounting lowers the perceived value of your offerings, and in the long run erodes your brand. Once you start offering discounts, the only way to get that rush the next time, is to discount more. If this cycle continues, your margin is gone, your prices are bargain basement, and your brand has reduced value.