Selling products at a low price is a marketing strategy that is often employed by both small and large businesses. The drop in price may or may not work depending on the perception the target audience has about the product. It is therefore essential to develop a pricing strategy that appeals to the preferred audience resulting in a quick response and high sales. No matter the approach, it should offer value to customers without leaving a massive dent on the company’s finances.
Types of discount strategies
The discounts offered by businesses that are lowering prices to gain more sales are varied and often depend on their overall goal. Although the types of deductions that can be integrated into the strategy are different, some of the most common ones include:
Quantity discounts
In this option, customers are given discounts when they buy large amounts of a product at one go. Customers that buy in bulk enjoy such discounts and often purchase products in large amounts and feel rewarded for their loyalty. The discounts can be offered to customers after they buy a certain number of products, which entitles them to a gift or a similar product of lower value.
Promotional discounts
Promotions are often designed to drive up sales for a limited period. The strategy usually involves lowering prices of a particular product or service that may be new or has been part of the range of products for a while.
Seasonal discounts
Seasonal discounts are given to customers that purchase products during off-peak times. The prices are much lower just before another season as a way of increasing sales. Some businesses that regularly offer seasonal discounts are travel agencies among others.
Cash discounts
To encourage customers to pay by cash and not credit cards, businesses often provide cash discounts. The use of cash as payment enables the store or company to have access to payments immediately without having to wait for them to be processed by a credit card company. Also, the use of cash helps them avoid costs associated with credit card processing thus saving money.
How to use a discount pricing strategy effectively
The best time to develop a plan that involves offering discounts is after having a marketing analysis done on a particular product or service. The report from the study makes it possible for a company to craft a strategy that will be effective and build brand loyalty all at the same time. Although offering discounts is an excellent strategy, it is essential to do it well to achieve the desired goals.
So, what are the five most important steps you need to take to create an excellent discount pricing strategy?
-
Set goals
Before deciding on the best pricing strategy for your business, it is essential to be clear about the goals that you want to achieve at the end of it all. Your goals will help determine the target market, marketing strategies and the type of discount to be offered. Although the objectives pursued by companies when considering discounts vary, there are some that are quite common. These goals include gaining repeat clients, acquiring new clients, increased sales and clearing of unused inventory. You can choose one goal or can combine with another to get more from the pricing strategy.
-
Select ideal pricing discount
It is common to come across may discount options when looking for the best one for your product. The best pricing discount is the one that matches your goals, and they can be changed from time to time as long as the promotional offer is still running. If you have no idea of the best discount offer, consider doing some research on similar companies to get ideas. Even so, some of the standard pricing discount options include prepayment discounts, volume discounts, bundled discounts and free shipping among others. Additionally, you can test out various pricing discounts over time before settling on the best one for your product.
-
Ensuring profitability of discount pricing
Setting goals and choosing a pricing discount that aligns with it is only the first step towards creating an effective strategy. It is essential to find out whether the discount strategy is going to profitable in the long run for the company or business. Some of the ways to find out whether your discount pricing will be beneficial are by calculating expected margins from the sale of products; the cost of acquiring customers and having high sales targets that cover any losses that may occur. It is essential to be flexible with discount pricing so that you can make changes as the promotion runs along until you can make a profit from the sale of each product.
-
Test out the strategy for discount pricing
Discount pricing strategies work differently on various target audiences making it important to test them out from time to time. In most cases, the strategy will give positive feedback at the start, but this can change over time with the engagement getting better or going downwards. It is therefore vital to keep tabs on the strategies and make changes as soon as they start losing the momentum or engaging customers. Additionally, the change of approach can be based on feedback from the target audience making it easier to make changes that appeal to them or getting rid of it altogether.
-
Research on the best pricing strategies
Strategies used by businesses when offering discounts are always evolving making it essential for companies always to keep tabs of the changes in their industry. Many companies are developing unique strategies that you can adopt for your clients and customize them to meet your needs. It is advisable to try out discount pricing strategies on your clients as often as possible to see whether it is a hit or miss.
Overall, having a tactical approach to discounting always pays off when done well.