Important Things To Consider For Your Next Discount Strategy

Did you know that 57% of all people who receive a coupon for a product they have never used before end up buying the product? Discount strategies are one of the most commonly used techniques for businesses to trigger sales. However, there are way too many elements in a discount strategy we overlook and then wonder why it didn’t work out as well. A discount strategy is not about lowering your margins and selling as much stock as possible. It involves several parts to consider, and that’s what we’ll discuss today.

Why Are You Offering A Discount?

Before launching a discount, you must be clear about your objectives. There are a few broad reasons to offer a discounted price to customers:

Stock clearance: Be it products with shelf-life or clothing items, clearing and refilling stock is one of the biggest problems for businesses. Stock clearance is the most common reason behind offering discounted prices. Customers are often more than happy to get products at the end of their life cycle at a discounted price.

Brand awareness: Discounts are an effective way to expand brand awareness. For instance, it is common for a new retail outlet to offer a discount right after opening. As more people become your buyers due to this discount, the word spreads quickly. Many businesses also offer discounts on special events, Black Friday being the most popular of all. But it can also be specific events like the foundation anniversary of the business or local events in the community.

Increasing sales: The flow of cash is essential for all businesses. If things are not working out in terms of sales, a short period of discounts can bring a business back on track. If you want to trigger a spike in sales, discount strategies are a great option.

Retaining your existing customers: You should also consider the most effective business customer retention strategies. Loyalty-based discount programs run across the year, unlike sales for special events. When you reward your customers for loyalty, they are more likely to stick around. This is not only one of the smartest ways of using discounts, but also more cost-effective than other ways.

Get new buyers: Chances are, many people will try your products for the first time only because of the discounted prices. But if the product is worth the money, you will earn a new buyer who would shop with or without discounted prices.

What Products Are You Offering Discounts On?

This is one of the first questions to ask for an effective discount strategy. You cannot and should not discount every product in your stock. Choose products that give you at least some reasons to offer them at discounted rates. If a product is new, and you want to test how the market receives it, offering it at a discounted price is a great idea. If a product is at the end of its life cycle, discounting it is a good strategy
Certain products are misfits and do not have any product market fit.

The only way to sell these products off is to give them away at discounted rates or as freebies. If you believe that a specific product is better than its leading market competitor, offering it at an introductory price can set the tone for success. Based on how you answer these questions, you will figure out which products to discount and which products to leave alone. A blanket sale on everything is not always the best idea and is best reserved for specific events only. Once you have figured out the products to discount, it’s time to understand your buyers.

Know Your Buyers

Everybody loves a fat discount, right? Well, not really. One of the many economic frameworks of categorizing consumer goods explains how we perceive expensive vs cheap items. When you see an $80 shoe vs an $800 shoe, your brain will automatically associate higher quality with the latter. In reality, the $800 professional shoe may be worth that much not because of nostalgic or scarcity factors. The quality of both shoes may as well be the exact same. It’s important to know your buyers before you lay out a discount strategy. The first thing you need to address is scarcity. If a particular product is scarce, offering it at discounted rates will sell it out immediately. But if it’s not scarce, people may not be eager to buy it even after the discounted prices.

Once you have addressed scarcity, you need to separate essential goods from luxury items. People do not mind paying an unreasonable amount for luxury items, and discounting them may not be as effective. However, everyone needs essential items, and they will grab whatever they can get their hands on when the items are cheaper than normal. By knowing your products and customers, you can come for a great discount strategy for your next sale.