Almost any entrepreneur rushes to use discounts. The trouble is that many people do it spontaneously, in an amateurish way. Due to such haphazardness, profits are often lost, because an unsuccessfully chosen discount can undermine the customer's trust without bringing the expected benefits. The purpose of this article is to tell you what types of discounts exist and how best to use them to arouse customer interest and even excitement.
Pitfalls of discounts
Discounts are not suitable for every business and not in every situation.
You need to be very careful with them in the premium segment. Such goods can be sold at a lower price only as a sign of respect for a particular customer. And then, you need to think 7 times. After all, by making the product more affordable, you kill its elitism.
Too frequent and generous discounts discourage customers. Customers are waiting for sales, considering the usual prices too high. And those who bought the goods at the old price are annoyed when they see how everything has become cheaper.
Discounts shift attention from the merits of your product to its availability. The value of the product is lost in the eyes of the customer. Everyone is starting to get used to what they buy from you because of the bargain price, and not high quality.
Even small discounts significantly reduce the profit from the sale of a particular product, because the discount is always formed by reducing the profit. Let's say you sell a thing for 1000, with a margin of 200. They gave the buyer a 10% discount, that is, they took away from the cost of 100. For the buyer, this seems like a small concession on your part. But after all, you have lost 50% of your profit (we subtract 100 of the discount from 200 of the markup).
This does not mean that we dissuade you from using discounts. It's just that any marketing technique has disadvantages, weaknesses. They need to be understood in order to level them correctly.
Nuances of presenting discounts
Let's share observations that will help you squeeze the maximum profit out of sales and promotions:
You should not make discounts less than 5%. They seem insignificant to the buyer and poorly motivating to buy. However, as we have seen above, they significantly reduce the entrepreneur's profit.
If the product is expensive, and the percentage discount is small, reflect it in money. For example, a thing that used to cost 100 thousand is sold for 94 thousand. 6% does not sound like a big discount, but the offer to save 6,000 rubles seems more attractive, because it's real money.
If the product is cheap and the amount saved by the buyer is small, reflect it as a percentage. For example, a T-shirt, which used to be given for 500, now costs 300. Claim a 40% discount. It's palpable. You can read more about such techniques in one of our previous articles.
When forming a discount policy, you should not limit yourself only to classic discounts. There are also bonuses and gifts. However, the profitability of their use also needs to be carefully monitored and calculated.
The discount strategy should be calculated based on your goal. Here are the three most frequent goals:
- To get rid of the perishable, stale goods in the warehouse — it is permissible to act more aggressively.
- To increase profits here and now — it is important to determine the profitability of the discount offered.
- Attract new customers — you need to take care of the impression that your online store will leave with the user
- Also, the discount should have a time limit. Otherwise, the difference between the stock and the price reduction in principle is lost. For example, on the Kercher website developed by us, the “product of the month” entry is used:
Common types of discounts
And now let's look at the most common types of discounts and the features of their application:
Club. Create a community around your online store. You give participants privileges in the form of discounts. It is not suitable for every product, because it implies regular purchases. For example, for a men's cosmetics store — yes. Stylish bearded men will always need beard oil, shampoos, etc. But for an online store specializing in the sale of refrigerators, this approach will not work. After all, a refrigerator is bought every few years.
Collective / Wholesale. For example, we bought shoes for the whole family, got a discount. This is akin to a wholesale discount, since it operates on the same principle. If people buy a lot of goods at once, you can afford to lower the price.
Festive. Many people purposefully expect sales timed to the holidays. For example, a family may delay buying a new plasma TV, realizing that New Year's discounts will begin soon. It is important for an entrepreneur to think through such activities in advance, not reaching everything until the last moment.
Seasonal. It is good for stimulating more even sales throughout the year. You can always go from the opposite. For example, you can sell a certain amount of liquid for lighting a barbecue in the cold season, if you offer a favorable price. And then the goods will no longer be stored in your warehouse, but in the buyer's garage.
For regular customers. Making a small discount to a previously attracted client often turns out to be more profitable than attracting a new one. Here discounts are included in a variety of loyalty programs, which also include bonuses and gifts.
Personalized, or for specific groups of people. For example, for pensioners, etc. Quite often, such promotions generate very clickable headlines. Phrases like "25% discount for students" arouse interest among students, despite their weariness.
Discount on the product-locomotive. You give a furious discount on some product, selling it with almost no profit for yourself. People come to the online store and buy something else at the same time. For example, accessories for a locomotive product or just a product accidentally noticed on your site. However, it should be noted that this technique works better offline. If the buyer physically came to the store for a locomotive product, he may be too lazy to go to another place for related products. On the Internet, it's a matter of a few mouse clicks.
In exchange for a useful action. For example, in gratitude for a review, recommendation, like or sharing in social networks. In fact, the user will pay you anyway, just a useful action, not money.
There is an interesting psychological moment here — once the user takes at least a small, symbolic action, the discount granted to him acquires a special value. After all, he had done something for her.
The discount can be provided in a non-standard, creative way. Just like on the Uncle Beard online store developed by us.
Alternatives to discounts — gifts and bonus programs
Discounts will always be successful because they are based on one of the basic desires of people — the desire to get more and pay less. Bonus programs and gifts to new and regular customers work on a similar principle. Let's look at these alternative solutions.
Bonus programs have a tangible advantage over discounts. It lies in the fact that the entrepreneur does not lose live revenue "at the moment". Instead, points are awarded for making a purchase in the future. Thus, the buyer's motivation is preserved — he understands that with a competent approach he will be able to save in the future. However, according to statistics, a significant number of points are either not used by the consumer, or they burn out. The downside is that the bonus program is only suitable for areas that involve regular purchases. And some categories of goods people buy very rarely.
Well-chosen gifts can simultaneously play the role of souvenirs, constantly reminding the client of your existence. However, this gift should have a number of features: compactness, usefulness, quality. Gifts can be given from a certain purchase amount, motivating the buyer to increase the average check. To do this, you need to announce a gift in an intriguing form. But in fact, it is not at all easy to choose such gifts so that they are valuable to customers, but at the same time they do not hit the marketing budget of the company too hard. Many companies give gifts, but often the consumer sends them to the trash the next day because of their inapplicability.
If this happens, then it was not a thoughtful marketing activity, but a meaningless Brownian motion.
In general, you can't get hung up on discount strategies. Usually, only large chains manage to make low prices their main feature. Manufacturers provide them with special conditions that you cannot count on. Firstly, they have different purchase prices. Secondly, with large sales volumes, you can afford a small margin.
Our agency has expertise in the field of promotion of goods and services of small and medium-sized businesses, which allows us to achieve decent results without lowering prices. Contact us!