Every business advice article says the same thing. Run a discount. Offer a freebie. Set up a referral bonus. Get people in the door.

And I get why it feels right.

When you’re just at the starting phase of your business, you need customers, and you figure a little reward will push people over the line.

It’s what you see big brands do. So you copy it.

Here’s the thing, though. There’s actual science behind why this backfires, and not a small thing either.

It’s called the overjustification effect.

Researchers found it first with kids. A group of children who already loved drawing were split into two groups.

One group was told they’d get a small prize for every drawing. The other group just drew. And after a while, the kids getting rewarded started drawing less, not more.

The reward made them rethink why they were doing it. Instead of “I draw because I love it,” the brain starts saying “I draw because I get something.”

And when the reward goes away, so does the motivation.

Same thing happens with your customers.

The person who found your product, told their friends, came back on their own, that person wasn’t buying because of a deal.

They were buying because they genuinely liked what you made. That’s a rare thing.

And when you offer a discount to everyone, including them, something shifts. I think it is not in a dramatic way. But it happens.

Their brain files you under “place that does promos” instead of “brand I actually trust.”

Not only that, you also attract a different type of person.

Someone who came in for the 20% off. And those people leave the second someone else runs a 25% off.

I found a story about an auto repair shop owner who started matching what chain shops were doing, first-time customer discounts to stay competitive.

Within a year, his usual customers were asking for the same discounts, new buyers expected them every time, and he was always running around to fill the spots of the ones who walked away.

I feel like he wasn’t building a business anymore. He was just managing a coupon.

That said, this doesn’t mean discounts are always bad.

If you’re running a launch and trying to reach people who’ve never heard of you, a promo makes sense. Cold audiences need a reason to try something new. That’s fine.

But if you already have people who come around, who tell others about your business, who reply to your emails, be careful what you do with them.

What actually works better is verbal recognition. A public thank you, a mention.

A reply that says, “Saw you’ve ordered three times now, no reason for this message, just appreciate it.” Stuff that costs nothing and weirdly works better than a gift card, because it tells them: you see them, not just their wallet.

So before you hit send on that promo, just ask: who is this actually for? New people who haven’t tried you yet, or the ones already in your corner?

If it’s the second group, maybe skip the discount. Send them a message instead.

Cheers,

Minosh

PS. If this made you think, I wrote a whole piece on emotional marketing for small businesses. Read it here.