If you’re looking to boost sales, discounting (or running campaigns that include discounts) is an excellent approach to do so. Discounting is the most popular “price approach for shops across all industries, adopted by 97 percent of survey respondents,” according to a report by Software Advice, a POS system research site.
For all their benefits, discounts come with some drawbacks, as well. Discounting is a great way to attract new consumers, but if you do it the incorrect way, you could wind up losing money or attracting the wrong people (i.e., those who will only buy from you if you decrease your pricing).
You need to plan your promotions carefully and develop intelligent offers to get the most out of your sales or discounts. Check out the advice in the following sections for some recommendations and ideas on how to properly apply discounts.
1. Establish your goals
One of the biggest blunders a retailer can make is to discount blindly. Make sure you have a good reason for holding a discount or launching a new promotion before doing so.
Are you trying to attract new consumers, or are you trying to keep the ones you already have? Want to entice customers who haven’t purchased from you in a long time? Let us know how we can help you. These are just some of the things to keep in mind while putting up an offer.
Different goals necessitate different discount types. As an example, if your primary goal is to acquire new customers, you’ll likely want to use more aggressive techniques like loss leaders or store-wide offers.
A multi-buy offer (e.g., BOGO or “Buy 2 get 1 free”) is a smart technique if you’re trying to move a slow-selling product.
Decide what products will go on sale, when, and most importantly, how much of a discount to provide by clearly understanding your discounting goals.
It’ll also allow you to track the progress of your efforts and identify areas for improvement in the future.
2. Make certain that the timing is correct
Timing is just as crucial as relevancy for discounts and promotional offers. Increase your conversion rates by sending out promotions at the right moment (i.e., when your clients are most likely to benefit).
Because of this, you must also keep an eye on what your customers are doing when they buy from you. For example, if most of your consumers tend to make purchases at the end of the month, you might want to plan your promotions accordingly.
The question of when a customer looked at or purchased anything can provide insights about what they might buy next and when. Italo Jewelry, an online jeweler, uses customers’ estimated engagement dates to calculate the frequency of receiving emails about wedding bands.
See if you can do anything like this in your own company. Suppose you’re in the business of selling children’s apparel, and a customer recently purchased several items for her three-month-old son. There are several ways you may use this information to forecast what she will require in the next six months or a year.
3. Your margins are important, so pay attention to them
Set an “acceptable range of margin” for your products to guarantee that you don’t give away too much or end up losing money with your discounts.
When Spreadshirt, a global marketplace for customized clothes and accessories, implements a deal, they do exactly that.
As the head of D2C Marketing North America, Adam Lasky, explains, “We have an acceptable range of margin per product category that governs our percentage-off type promotions, unless the goal is aggressive new client acquisition.”
According to Adam, they hope their more aggressive promotions will be offset by their higher lifetime value or cost of acquisition in the long term due to their higher discounts.
4. Try out a variety of discounting strategies
There is no one-size-fits-all discount strategy because your business, products, and customers have different needs. What’s the greatest method to get to the bottom of it? Try out a few different approaches to discover which one is most effective.
Examples include percentage discounts like 10% off and dollar-amount promos like $5 off, which may be more successful for specific retailers.
It’s all about your customers’ initial impression of what seems like a decent bargain, according to Craig Simpson, a contributor to Entrepreneur.com. As an illustration, he offers the following instances:
We assume that your product is relatively inexpensive, such as a one-month supply of a supplement that sells for $25. Even though the real value of the two offers is the same, I would expect a 40% discount to perform better than a 10% discount.
For a more expensive item, such as a $350 piece of exercise equipment, a $50 discount will do better than a 15% discount, even if the 15% discount is marginally better in value. An offer of $50 seems to be a significant amount of money. Finding out 15% of $350 may be too much work for most people.
The easiest way to decide whether to offer a percentage or flat-rate discount is to perform the arithmetic and consider your promotion psychologically.
5. Put the attention on new things first
Another retailer that has been able to alter its offer approach successfully is clothing retailer Express. Additionally, the business began relocating its sale items to the back of the store to boost sales of its more trendy (but higher-priced) products at the front of the store.
Express was able to encourage customers to purchase new and full-priced things without rejecting those who were looking for a bargain, by doing so.
6. To encourage impulse purchases, upsell and cross-sell
Discounts can bring additional customers to your store, so take advantage of upselling or cross-selling. Assist your employees in recommending new products or improvements to customers looking for the store.
To help your colleagues provide the best possible recommendations to your consumers, think about the products you’ll be selling and develop possible product recommendations in advance.
For example, let’s imagine you’re offering a discounted pair of pants. Determine which accessories or other clothing items might go well with that pair of jeans, and then instruct your personnel to bring up these products when speaking with customers.
When it comes to merchandising your store, keep this suggestion in mind. Displays might help you upsell or cross-sell. The mannequins might be dressed in well-coordinated clothes that feature the jeans on sale, so shoppers can see what they can buy with their pair of jeans.
7. Execute promotions with conditions
If you want to keep your profit margins intact while offering discounts, you can do so by establishing criteria. Be specific about what buyers must do before they can take advantage of an offer rather than running a blanket campaign (e.g., “$10 off any purchase” or “25 percent off all items”).
Some examples of these conditions:
- You get a percentage discount if you buy a certain amount of things.
- For every dollar you spend, you’ll save this percentage.
- To save a percentage, buy particular items/SKUs.
- Get a free or discounted item when you purchase a certain number of things.
- Spend money and receive a free or discounted item or products.
It’s also possible that you’ll only give discounts to clients who have signed up for your loyalty program. Coffee company Starbucks recently hosted a member-only sale event. Customers in their loyalty program received emails with discounts of up to 20% off selected items.
These are some interesting tricks that will guarantee profit and increase sale, try them and let us know what worked for you!