Offer Discounts without Losing on your Profits
Discounts are always a lucrative way to increase sales and tempt the customer. Many of the discount strategies work wonders if they are backed by a strong service and distribution channel. But if a company constantly lowers the price point, there are chances it might eat into the profits.
When small businesses are looking to move up their sales figures, discounting is one of their first approaches. Here are a few tips that can make your discount strategy in retail work without cutting into your profits or damaging your brand image.
1. Define your Goal
- Keep yourself and the team focused on the discount strategy decided. Blindly introducing discounts will not solve the purpose. Keep weighing the pros and cons and cut your cost to an extent that you will remain profitable.
- If the purpose is to make new customers, then you can adopt a heavy discount strategy across your retail channels that increases the footfall
- If you are looking to re-engage with customers who have bought products from you before, then maybe look at some customized offer, or offers on a product that is bought more
2. Get a Competitive Advantage
- If you are looking to sway customers from your competitors, then go for a discount strategy that will be lesser than your competitor's pricing, but will keep you profitable
- In this case, when the customer compares your product with the competitor, even a difference of as low as 300 rupees makes a difference
- If the customer notices that your pricing is always lower, maybe after a few trials they will start coming straight to your retail outlet and buy rather than even comparing
3. Make Customers feel Positive
- Sometimes even a small discount or a gift coupon makes customers happy about shopping from you. They leave with a positive feeling about your brand.
- This will help you in the long run as the customer will associate you as a brand that cares for them
4. Timing should be Right
- Sending out discounts at just the right time i.e. when customers need them, this will greatly increase your conversion rates. A discount strategy like this works wonders in retail
- For e.g. if you have lost of customers that come and buy in the first 10 days of the month, then aim your discount strategy around that time
5. Keep a Check on your Margins
- Compare the sales you need to do at your current margins to achieve your target revenue with how much sales is needed at the discounted margin. The marketing activity can be increased proportionately then
- A lot of companies also set an ‘acceptable range of margin’, unless your objective is aggressive customer acquisition keep you discount strategy in retail within the acceptable range of margin
6. Promote Sale of New Products as well Impulse Buying
- Since you have put items on heavy discounts, people who visit the store will indulge in impulse buying as well. This discount strategy in retail will help in selling other products as well
- Give your customers product recommendations and suggest upgrades that can help push your sales indirectly
- Arrange your products in a way that, the new products are placed in the front of the store while the discounted one behind them. The customer will be left with no choice but to go through the new launches and make note of them. There are chances that he might pick up an item here or there for trial
7. Give Discounts with Conditions
Don’t offer blanket discounts, make sure you have some pre-requisite conditions that the customer must meet before being eligible for the discount.
Try different method of discounts such as:
- Buying a certain number of quantity
- Spending a certain number of amount
- Special discounts for Loyalty Program customers
- Buy 2 and get 1 free
- Bundled Discounts (Cub 2 or 3 items in similar categories together, For e.g. A face wash and a cream)
These conditions don’t let discounts eat into your profits and maintain healthy sales
8. Offer Heavy Discounts to get rid of Old Products
- This strategy works for products or businesses that are usually seasonal. For e.g. if you run a clothing boutique, you can get rid of your summer collection by offering heavy discounts and you need to display clothes for the next season
- It can also be used for electronic items like mobile phones especially when a new product of the same series is being launched. To get rid of a lot of the existing model inventory, heavy discounting can be used.
- This discount strategy helps in at least getting rid of the stock even at the base price instead of dumping them away
Discount Strategy in retail can be a great tool to get in new customers, also engage with your old customers and dispose of old inventory, what really needs to be worked out is the strategy. Calculate how much discount can you afford to give otherwise there is no option left but to give it away from your profits.