The holiday season is here, and as any business owner knows – it’s the time for discounts.
Not only are customers hunting for discounts–they also expect them. This can present a challenge for a business owner: discounting products can be great for sales, but it can also damage the brand if not done correctly.
Here are some tried and tested tips to keep in mind when discounting products:
1. Have a Strategy
It sounds simple, but the most critical way to make discounting work is to actually think it through – no impulse discounts.
You need to have a strategy in place before you begin. Your strategy should include the following:
- How much will you discount your product by? Will this be 10% off or 20% off – or even more than that? Whatever amount, be sure that there’s a method behind the madness and that it will make sense for your brand/profit margins and unit economics.
- When will this offer run from/to? There’s often confusion around holiday offerings about the actual length-of-offer. Is the offer running for the holiday weekend? Is it a seasonal offer that starts at a holiday but extends for a while? The span of your offering will heavily influence buyer behaviour, so it’s essential to think through the outcomes.
- What kind of promotional material do I need to put together? Do you need posters or flyers or social media posts about this promotion so people can see what’s going on with your business during these special days/weeks/months/years?
Make sure whatever material is created reflects your brand properly so people don’t think twice about whether or not they want to purchase from you based on how professional everything looks on paper (or digitally).
2. Know Your Audience & Competitors’ Strategies Beforehand
The more you know about your audience and competitors, the better you can prepare for a successful promotion. If you know that one of your competitors is doing a big sale, you may want to do something similar or even better than what they’re doing.
On the other hand, if you don’t think they’re going to do anything at all, then it’s a good idea to get out ahead of them by discounting early on. Knowing what’s going on with your competitors will help give you an idea of how much to discount and when to discount.
3. Choose Your Discount Method Carefully
There are a number of different discount methods you can leverage – each with it’s own pros and cons.
Buy one get one free
This method is great if you have a high priced product that you don’t want to discount by much. You can get a lot of sales out of this method because customers can essentially purchase 2 products for the price of one. The downside is that it’s unlikely to be profitable unless you have a dramatically different ticket price between the products.
This is where you offer a product as a bundle (usually with a lower priced product) and customers can get the bundle for a discount. This works really well during holidays with gift giving. The downside is that the price of the bundle product can be higher than the regular price of the products and it would have been more profitable to just sell them individually.
This is where you discount your product by a percentage – usually 10-20%. This is great for products with high margins that might not have a lot of brand presence. The downside is that the price of the product isn’t necessarily as low as you’d like it to be vs competing products.
This is where you offer a discount for prepayment. This strategy works well for high priced products but it can be risky if you don’t know how much to take for prepayment. Another downside is that people don’t always prepay their orders – that’s a risk you need to quantify in your unit economics.
This is a great method to use for the holidays because you can give your customers a great incentive to shop with you and purchase from you instead of your competitors. The downside is that you have to cut into your profit margins and are heavily dependent on the local shipping costs and geography of your customers.
Loyalty program incentives
Another option is to offer short-term signing incentives for loyalty programs. This is great to lock in customers when buyer intent is at its highest. The downside, of course, is that you’ll have to work on getting the necessary long-term business from the customer to justify it.
4. Do Your Research
It’s important that you do your research before running any kind of promotion so that you know what your audience wants from your business and what kind of results they expect from the product. You need to have a clear understanding of how this product will benefit them as well as why they should buy it from you instead of someone else.
Make sure that this information is available online for people who are looking for it and ready to purchase at any time.
5. Make Sure Your Customer Service Is On Point
When running a promotion, it’s important that customer service is always on point so that customers feel like they’re getting their money’s worth when buying from your business (even if they’re getting a deal).
Customers expect fast shipping times as well as accurate orders when ordering products online or in-store so make sure that those expectations are met at all times during this promotion period (and always).
6. Have Plenty Of Inventory & Stock On Hand
This is particularly important if you’re running a sale in-store or online. You want to make sure that customers are able to purchase your products during the promotion period without any problems so it’s critical that you have plenty of inventory on hand for them to purchase from you. It might be important to run some demand forecasting exercises as well.
If they can’t find what they’re looking for, then they may go elsewhere and not come back.
Discounting products can be a great way to attract new customers and make sales, but it’s important that you do it correctly so that your brand isn’t damaged in the process. Ultimately, beyond immediate cash flow, a good holiday promo should drive real brand awareness.
Have a strategy in place before discounting products so you know exactly what you’re doing and why you’re doing it. Keep your audience and competitors in mind as well as any research you’ve done on the product itself. Also, make sure that your customer service is always on point during these promotion periods so people feel like they’re getting their money’s worth when buying from your business. Oh – and don’t over-promote your product during these promotion periods. This will lead to distrust with customers who may think there’s something fishy going on with your business, while potentially alienating existing customers