In retailing businesses, providing a discount is a very good way to increase your sales. Promotional offers always work. Discounting in retailing is arguably the most effective way to drive sales. According to a study provided by software advice, POS system research, discounting is the top pricing strategy for retailers across all sectors, and it is used by 97% of survey respondents.
But as it is commonly known that a good thing also has a bad side too. The strategy of discounting is a double-edged sword. While slashing prices at a lower level can attract consumers, they start buying products only when your store is at a discount. This can result in situations when you get hold of the wrong types of shoppers and end up killing your profits.
So before you think of running sales or discounts at your store, you need to plan your promotions well and first make a plan so that you can meet your objectives easily. Well, we’ve made this job even better, we have jotted down some pointers below with tips and ideas on how to implement this correctly.
Define your objectives
Activities and efforts are completely wasted if the purpose and objective are not clear. What is the biggest mistake that retailers make? Before running a sale or offering a hot new promo, you need to see that you have a clearly defined purpose for doing so. You need to ask yourself the following question:
- are you doing it because you want new customers?
- you want more engagement made among the existing ones?
- do you want to lure in people who haven’t bought from you in a while?
- do you want to get rid of excess stock
- do you want to reduce old stock so that the new trending stock can make its way in your warehouse?
These are just some of the questions which you should think of before crafting you’re offering. Different types of objectives lead to different types of discounts. To understand this concept better below is an example.
If your purpose is to achieve customer acquisition, then you would probably like to go on a more aggressive tactic. You will go wide with the sale offering to increase leads and attract several people. On the other hand, if you want to engage people who have already purchased from you in the past, then you would want to add a personal touch to your offers or run customized offers. You can either have offers for that specific person or maybe send personalized messages to them.
Therefore if you do define your purpose of discounting, you will easily be able to make decisions on what products to put on sale, how big you want the discount, when do you want to do it and what is your target.
Segment shoppers and define promotions accordingly
No two shoppers are identical in their shopping preferences. Understanding the buyer persona and what they look for from you is important. An easy way of doing this is by setting the customer’s profiles. This profile can consist of a pointer such as a price sensitivity and shopping habits. You can use tools to determine the kind of discount you can flash in your store.
Below is mentioned a sample customer profile that you can go through.
Kanjyik Ghosh- likes new and trending products, price is not an issue, focuses on the quality of the product, buys several times in a month.
Sanskriti Basnet: looks for sale items, purchases decisions are based on price, purchase once or twice in a year.
If we compare both the types of customers, in the first case, it would be better to send sneak peek of new products, suggest products that compliment items he previously bought, provide VIP services and exclusive invites. On the other hand, in the second case, it would be more beneficial for you to send clearance alerts, suggest lower price items and try to showcase an urgency to limited time offers.
With the right software, you can manage your customer segmentation and promotion customization with relative ease.
Make sure the timing is right
We all know timing is one of the most important factors. You might have identified the objectives and crafted the most attractive discounts, but if your timing is not right your customers are not going to buy.
Timing can be just as important as a living. Sending out offers when your consumers need it, will greatly increase your sales. This is one of the reasons as to which you should also pay attention to when the consumers shop from your store.
For example, if you have consumers at the beginning of the month then you should schedule your offers around that time. Another very important thing that you should remember is the question of when a customer looks for the product. This can provide insight int when they might buy. For example, an online jewelry retailer, the schedule their offers in the wedding season to get a huge turnover through sales without disturbing his profit.
Be mindful of your margins
Promotion involving discounts impact your profit margins. To make sure that you do not lose too much money on discounts, it is important that you set an acceptable price range for your product. For example, you can set a price band for each item in inventory which is authorized for your sales agent. In extreme stations when you want aggressive acquire new consumers, this strategy can be broken otherwise it better to maintain an acceptable margin that helps you to have good consumers who are regular as well.
When it comes to discounting, in the long run, the customer lifetime value or cost of acquisition from the promotion will help you make up for the more aggressive promotion.
Implementing psychology pricing
You can implement creative pricing and promotion strategies to avoid ways in which you might end up giving too much or hurt the value of your brand. Providing offers that might trigger the wants of the consumers helps a lot. You can change or mold or even add on to the basic offers to make it unique and creative.
For example, you can provide an offer which states that if the consumers buy products up to Rs 5000, they would get add on vouchers of Rs 1000. This would make the customers buy products worth Rs 5000 at least because they would want to avail of the offer. There are many more such ways in which you can put unique psychological offers.
Test different discounting tactics
The right kind of promotion and discount method vary depending upon your business, the type of products you deal and the kind of customers visit your store. The best way to figure it out is by implementing different kinds of promotions and see what works best for you.
For example, some retailers might find beneficial to give a person a percentage discount while others might want to give an amount discount. Customer’s initial impression on what sounds like a good deal is what helps you increase your sales. For example, if your customer purchases a product that costs Rs 3500, and you provide an Rs.500 off rather than showcasing a 15% discount, your product would sell more.
In case you are confused between a percentage or amount discount, you can do the math and look at your promotion from a psychological standpoint so that you can figure out the best type of offers.
It is also important to profit test your offer so that you are not losing money. It is said that percent of sales are fairly simple to test. For example, if net profit numbers don’t hold for a 20% discount, we move it to 15% and still sell more than if we offered a flat discount of a certain amount.
Run conditional promotions
You can set conditions so that you can protect your margins. Rather than running blanket promotions, it is simpler to set limits or conditions that customers have to meet before they can redeem the offer.
For example, you can have offers which say, “ buy X number of items and get a certain percentage off” or “spend X amount to save a particular percent”. There can be many more such offers which may attract new consumers and encourage old consumers to make further purchases.
You can also provide discounts exclusively to those consumers who you feel are loyal to your brand. For example, Starbucks had started an exclusive sale event in which it provided 20% off to selected consumers on selected products.
Put the spotlight on new items first
Even though you may be running promotional offers and sales in the store, it is important to keep the spotlight on new items. Make sure the new arrivals are displayed properly so that the customer can see them first. Doing so can help encourage consumers to buy the new products at full price even though they may have come to the store for the deals.
This strategy will help stores attract new consumers who are more interested in buying the tending product rather than discounted ones.
Promote impulse buys, up-selling and cross-selling
Cross-selling is a good way to increase customer basket size. Discounts will drive more people to your store but converting the visitor into customers depends on the store collection and your sales associates. You can do this by asking your associates to encourage consumers who are shopping around your store. Consider the item that you’re putting on sale and then come up with personalized product recommendations in advance, so your associates know exactly what to recommend to the consumers.
Let’s say you are trying to sell a particular style of jeans which is on discount. You can simply identify accessories or other outfit pieces that would go well with that pair of jeans and then make sure your employees talk about those items when they are interacting within your store.
You should also keep cross-selling and up-selling in mind while styling your store. While designing the layout make sure the cross-selling items are kept close by so that the customers can browse while shopping and that they are induced to purchase the addons.
Let’s go back to our earlier example of jeans. While laying out the jeans on the shelf make sure it is next to a shelf of accessories. This would attract consumers more and will increase your sales also. In case you still do not have a display that promotes impulse buying, it is high time you set them up. This would help you to get more sales traffic into your shop.
An excellent way to get more out of every transaction is by getting customers to notice items that they can purchase on the fly.
Offer discounts to select consumer groups
You can also try offering exclusive and personalize discounts to a specific group of consumers. For example, you can as students discounts or especially for women discounts. This strategy will allow you to run discounted promotions without touching the margins or being defined as a discount brand.
You can check out many companies that do such things. The companies will give exclusive discounts to a particular group of society which helps bring brand visibility and also brings in new members. The strategy is very popular. It is not necessary for you to only have a discount for one particular group. You can have different products on the discount This would depend on the type of consumers you have and the types of products you dealing. This would excite your customers as they would feel special.
You don’t always have to lose money or hurt your brand to provide offers and discounts. As we mentioned above, those were 10 creative tips that you can execute. They have a clear objective and can help you gain profits and attract the right type of consumers at the right time.
Segmenting customers and providing targeted promotions can be achieved with the right kind of software. Your retail POS should be equipped with agility and the ability to run any kind of promotion that can drive up your store sales. Easyops POS is a modern cloud POS that comes with built-in intelligence and ease to use promotions module to help you set up and run any kind of store promotion. To start your free trial click here.
If you like the article, do leave a comment below. Also, tell us which of the above-mentioned strategies was most suitable for your store.