While discount is an intrinsic aspiration of all customers, it is arguably the most important pricing strategy for all businesses, especially retailers. However, this requires great care in execution.
ContentsSetting Discount TermsRewarding LoyaltyBundled Product DiscountSpecial Consumer Group DiscountsPrepayment DiscountsIncentive DiscountsAbandoned Cart IncentivesEvent and Seasonal DiscountsDiscount CodesPackYou can think of it as a double-edged sword.
It can attract customers and boost sales. And with bad implementations, it can also lead to reduced results.
I know that after reading the previous paragraph, all ambitious entrepreneurs would be eager to know the most effective reduction strategies and tactics they could use. If you are one of those people, read on.
Instead of advertising blanket discount offers like 15% off or $15 off all purchases, a conditional discount strategy protects your margins. This improves your conversion rate at the same time. You can always set conditions or set certain limits for customers to get a discount.
The following examples explain this strategy:
• Get X% discount if you buy Y or number of items: This is also called volume discount aimed at inducing customers to buy products in large quantities. Significant discounts for large volumes attract new customers. In highly competitive markets, businesses lock in customers with this strategy.
• Buy one, get one free, or buy one and get another at a discount: This strategy is commonly used by many retailers. They make a good profit with a large turnover.
• Spend a certain amount and save X%. This strategy encourages customers to purchase an item in bulk for future needs or purchase multiple items to take advantage of the advertised savings.
Loyal customers deserve special favor.
For businesses, selling something to a new customer costs 10 times more than it does to an existing customer. These discounts prove to be an excellent retention tool.
Offering attractive discounts to regular and regular customers makes them feel privileged. The point scoring mechanism for loyalty club members is a great tool that motivates customers to spend more on purchases to get higher points. Each point has a dollar amount that you can redeem at any time.
Loyal customers are often rewarded with special arrangements. For example, a sportswear store offers a discounted local gym membership to its customers who spend a certain amount. Reciprocally, the gym also offers coupons to its loyal customers for shopping at this sportswear store.
This strategy bundles a group of products together and sells that bundle at a discounted price. Customers perceive a package discount as a better deal than a discount on individual items.
Fast food chains, like McDonald's and KFC, understand this concept of bulk discounting quite well. With this, they offer various offers that combine many items for a discounted cumulative price rather than buying each item individually.
Similarly, a cable service provider may sell you Internet, cable TV, and home phone services separately or as a bundle. In the latter case, the price you will pay will be much reduced compared to the individual services.
Bundles work well for profit margins, which are high enough to cover the cost of the bundle. Higher sales thus increase profitability.
Sellers can make the most of special discounts for certain consumer groups. For example, students, seniors, and women usually buy discounts. They look for promotional offers and are eagerly looking for the sale.
According to a Payment sense report, 71% of women say they would be more likely to purchase an item on sale. A study conducted by Stock and Bailey reveals that college students, both men and women, search for items on sale and look for promotional offers.
The strategy of offering discounts to exclusive consumer groups allows sellers to take advantage of these discounts without hurting their bottom line. Many companies offer discounts to certain groups of consumers.
FedEx, for example, offers 30% off documents and 20% off shipping to students. Bealls, the retail clothing store, is offering a 50% discount to seniors (50+) every Tuesday. These are just two examples.
In fact, consumer reduction strategy based on segmentation is very common. Most customers are highly appreciative of companies that offer student, military, and senior citizen discounts.
Companies offer a good discount on advance payments for services and physical products. There are software companies that charge monthly or annually, offering discounts in case customers choose the annual option. Advance payments can be used to acquire additional inventory or to improve cash flow.
The early bird discount is also a special type of prepayment discount strategy. Many online stores use it for launch products. Customers are motivated to book their orders ahead of launch and are rewarded with substantial discounts.
Hotels, training academies and publishers are some examples that use this strategy successfully.
These are rewards for certain favorable actions by your customers that can open doors to greater business opportunities. For example, you can advertise an automatic 10% discount to customers when they share your products on Twitter. Another such incentive can be a 20% discount on referring three friends.
These action-oriented discounts may seem more expensive initially, but they promote and benefit the business in several ways. In fact, careful use of this strategy brings multiple marketing benefits to the business.
Every online business encounters those shoppers who add items to their cart and then leave the site without making a purchase. Reasons for abandonment often include higher shipping costs, long/complicated checkout process, and poor site navigation.
Being a major problem for e-commerce, companies are paying great attention to it. Enters the abandoned cart email policy, which includes sending an appropriate personalized message shortly after abandonment. The message is sweetened by an incentivized purchase agreement, offering a discount.
Most businesses report an increase in conversion by using the Abandoned Cart Discount. One caveat, however, is to make this discount a one-time offer. This is important to prevent the customer from getting used to giving up the card to get a discount.
Events and discounts now seem inseparable. Whether it's Black Friday, Christmas, Valentine's Day or Mother's Day, companies are offering substantial discounts.
Most people tend to be in a buying mindset these days. Retailers can increase their sales volumes with smart and well-thought-out discount strategies.
Many companies tie discount programs to company-specific events. One of Germany's leading teleshopping channels cleverly discounts its under-selling products on self-designed events, such as the website's anniversary or an annual themed exercise week.
Seasonal discounts often target off-season inventory to help reduce inventory carrying costs. Seasonal discounts generally exclude high-end brands and are limited to products sought after by bargain hunters.
See also:How to survive Black Friday
Savvy marketers very often use the ubiquitous coupon codes to track their campaign ROI. Retail shoppers happily search sites like RetailMeNot or SlickDeals to find the best shopping deals.
Discount codes are alphanumeric strings. They are offered by online shops as part of their overall marketing strategy. The coupon, according to research conducted by the Center for Neuroeconomic Studies at Claremont University, is found to be physically more pleasurable than receiving a gift.
These sophisticated marketing tools drive sales and help build brand image. The coupon code strategy for a discount is producing great results in terms of revenue generation for retailers around the world.
See also:Everything you need to know about discount codes
The right discount strategy definitely increases sales and improves your revenue streams. However, three preconditions are essential to obtain a guaranteed positive outcome of discounting. These are:
While the correct and timely strategy delivered to relevant customers can alter your sales volumes, the wrong strategy can negatively impact your business. It's about matching your goals with an appropriate strategy.
