Businesses implement various pricing techniques for their products to increase sales and drive-in new customers. Product discount techniques can include special offers, running sales promotions, and making price comparisons with competitors. But, these techniques can work both positively and negatively on the bottom line of your business.
Depending on factors like development incremental stage of your business, the number of customers you have and the way you handle them, product discounts can bring strong returns or create misunderstandings that will directly create a bad impact to the bottom line of the business. And, you would not like that to happen!
Here are some things that you need to keep in mind while offering your product discounts.
1 – Offer discounts considering overall margin analysis
As discussed in the opening of this blog, discounting your products is feasible only if you have established enough loyal customer to cover a fixed monthly revenue goal. If not the case, then offering product discounts could leave you short in the balance sheet.
Product discounts is not at all a good marketing technique for start-ups, instead attract customers with your abilities, communication skills and work ethic. However, if nothing works out and a product discount technique is the only option left to drive-in sales, then it is always suggested to offer discounts in a smart way. Offer small discount like “referral discounts.” This way your discount strategy will not impact the bottom line of your business.
Similarly, for medium and large business that have few potential customers and are finding it difficult to drive-in more that two or three new customers per year, even when the quality of work is high – you can implement the referral discounts. So, this way you entice your existing customers offering discounts on certain products if they refer a new customer to your business.
Having a substantial flow of overall margin in your business, you can easily integrate product discount strategy in a broader way. Using product discounts as one among several methods of appreciation will help you gain the most from your product discounts.
2 – Never offer discounts to retain customers
Why do you implement offering product discounts? Is it because your customers demand for it ? Or, is it to get back customers who had left you for a cheaper competitor? If you offer product discounts for any of these reasons, then your approach is wrong – which will badly impact the bottom line of your business.
In general, offer product discounts to express appreciation for long-term customers loyalty and cooperation towards your brand. Never chase customers by lowering the value of your own work, just to retain customers.
3 – Entitle certain group of customers for the discount
Offering discounts in general can be a huge risk to the overall margin value. Also, when you offer product discounts to attract new customers, you are spoiling them from the start. Such customers will only shop from your site only when there is a discount, and it is not feasible for any business to constantly offer discounts.
To avoid such scenario, it is always suggested to offer product discounts to a few selected customers who obey standards of your business. These standards can include – customers loyalty, the number of purchased made by your customers, the number of referrals provided by your customers, and your customers payment punctuality.
Allowing product discounts as per the above mentioned standards will surely create a good impact to the bottom line of your business.
4 – Combine strategy while offering discounts
One of the most effective way that can help you minimize risk on the bottom line of your business, is to combine strategy and offer product discounts. Some ideas are:
- Bundle products
- E-gift vouchers
5 – Don’t get too excited to announce your discounts
Depending on the reason you are offering the product discount, there are ways to announce it, to create the right impact on the bottom line of your business as well as to prevent misconceptions about your change in pricing.
You can either announce product discounts through your websites or you can select customers and discuss product discounts individually. Announcing your product discounts publicly through your website, you should first prepare a list of predefined group of customers – that may include your return customers or those who are frequently shopping from your site. Making such announcements will help you attract new customers and entice old customers to shop from your site again.
Avoid big excited flashy “buttons” to draw attention, instead place subtle “call-to-action button” on relevant pages that will help you acquire more customers to shop from your site.
And, if you want to offer discounts to your few special customers, just discuss it privately. This way you gain customer loyalty that will make them shop from you again and again, creating a good impact to the bottom line of your business.
The above steps will help you make a right approach. But, more important is to consider proper lineup of customers and margin analysis before offering product discounts.
Savio Fernandes is a writer who influences. Writing for over three years at Orderhive, he is currently focused in offering eCommerce and retail solutions for start-ups and medium business owners.
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