There are discounting traditions like Black Friday or Cyber Monday for which people prepare and save in advance. God knows what they are capable of doing on an early, Black Friday morning to grab the discounted items on their lists.
Undoubtedly, all vendors participating to such events have good if not remarkable cash flows on these days.
But what happens with your cash flow as a vendor the day after such an event? Or the next week?
Are these big discounts effective for increasing your income or is it that when you draw the line at the end of the year you discover that you were actually losing money.
Is Called For A Strategy
Discounting the price of your product or service is indeed an effective way to increase sales and market share. But while this is true, you need an effective discounting strategy if you want the short-term increase in traffic to make a difference for your company long-term.
The pricing strategy is one of the most important elements of a marketing campaigns as the price directly impacts the amount of profits you make on each and every sale.
With a discount pricing strategy, you can increase demand but there are drawbacks that you must consider as well.
Here are the steps you need to follow for developing an effective discounting strategy:
Step 1: Define the Purpose of Your Discount Campaign
Before you can develop any type of strategy, you need to know the purpose of your marketing campaign.
Defining your goal helps you determine what types of discounts you can offer and how you should measure the results of the campaign when you are performing a marketing analysis. This is why defining the purpose is the first step that you cannot skip when you are planning.
There are numerous different goals a discount pricing strategy could have, but here are the most popular of them:
• Increase of your Short-term Sales
In a slow season, discount pricing is an effective way to increase your sales for a short period of time.
You might even want to try this strategy during the holidays when consumers are buying and looking for high-quality goods at a bargain. If you are hosting the promotion on pages with high levels of traffic, discount pricing is practical because the sales volume will make up for the loss.
• Move your Dead Stock
As you know, the longer your product stays on the shelves the more it costs to carry. One effective way to move your out-of-date stock is to discount it. This will reduce carrying costs and increase your inventory turnover.
• Introductory Promotion
One way to create demand for a product at the beginning of its life cycle is to offer a discount price. Discounting is an effective strategy for introductory promotion and will create a buzz while it drives up demand.
If you are promoting a high-quality product and customers can see the value, they will be willing to pay more for the product as it matures.
• Market Penetration
If you want to increase your market share, choosing a specific product to discount to drive traffic into your store is a good option. You will attract new customers into your store and chances are they will buy the discounted goods together with other goods that are not discounted.
• Reward Your Loyal Customers
Customers love to feel appreciated. If they are loyal to your business, reward them and offer them discounts once they reach a certain spending limit. This is a sure way to persuade them to stay loyal to you as opposed to buying from your competitors.
• Creating Brand Loyalty When it Does Not Exist
If your brand loyalty is low, you can create brand loyalty by discounting. By offering a discount on your customer's next purchase, they are highly more likely to retain customers and make them shop at your store more than once.
• Gain Advantage Over the Competition
Customers see more value in your brand when you set competitive pricing. Discounts can help you gain leverage in the industry by setting your prices lower than the competitor's.
Step 2: Understanding Your Customer's Psychology in Regards to Discounts
While customers do want to find a good deal, discounting can affect their opinion on the product and on your company as a whole.
You need to know how your target market reacts to discounting and how their impressions of your company and the product can be affected when you discount. Not all target markets are receptive to discount pricing.
Target markets are either:
• A lower price will create skepticism. The customer might feel that a lower price represents poor quality.
• Customers find loyalty to their preferred products and brand more important that getting a discount.
• Customers who are experimental will always watch for sales promotions and discounts and are willing to try products that cost less and still offer the same value.
• Impulsive customers often buy discounted products because they are getting a deal, even if they do not need the product.
Step 3: Make the Offer Available to Your Target Audience Through the Appropriate Method
You have to consider your target audience when you are choosing where to make your discount offers available. Here are the most effective methods to choose from when you are developing a strategy:
• Target your online shoppers with a dedicated promotional website content. You can do this by designing new landing pages and optimizing these webpages for a targeted segment through the search engines.
• Display advertisements that will only show to a relevant targeted audience.
• Re-target customers based on their level of engagement with your website by developing more than one offer.
• Personalizing offers to meet the needs of each site visitor based on their preferences and prior purchases. You can also personalize messages via email and text messaging when you have loyal subscribers that you want to inform of your discount pricing offering.
It's important to use your discounts sparingly and choose the appropriate methods in order to maximize your sales without having to maximize your marketing budget.
I'd love to hear your thoughts on this so, do not hesitate to comment below!