The price is right … or is it?
How to make discounting work?
It’s a New Year and another January.
If people haven’t shopped enough, they’re now being enticed with even more offers. It’s not just January which sees prices cut now, with many businesses offering new deals throughout the year.
But many consumers still focus on the deals to be had in January.
So, how often should you discount products or services? Is an extended sale period good for business? How much of your stock should you discount and by how much? And how do you continue to attract customers during less popular times of the year?
Here is some guidance and our latest thoughts on the topic to help you make the most of your January sales.
Is 10% enough?
Restaurants and bars are usually far busier in December than January, but how do they make sure they still have enough people to prop up the bar in the New Year? According to a recent survey by HGEM (an organisation that seeks to empower hospitality operators), a discount of 30% is the ideal amount to increase footfall into your restaurant or bar during January.
So now you know why you get so many emails offering discounted meals at that time of the year.
If your business isn’t focused in the hospitality industry, will offering a 30% discount work for you too? What else do you need to know?
Too many sales can hurt your business
If customers recognise that you often cut your prices, then they are likely to hold off on purchasing until those times. Frequent discounts can give consumers the perception that the product isn’t worth the full price any longer.
Take designer shoe brand Manolo Blanik.
They are going to rarely be heavily discounted but when they are in a sale, people feel they are getting a real deal. If they were available at a lower price too often, the shoes would lose their high-end appeal.
How to discount successfully
The type of discount you offer will depend on the reason for the sale. You might want to get rid of excess or seasonal stock, you might want to entice new customers or you might be matching competitor sale prices.
- If you have seasonal products
If you have Christmas biscuits or chocolates for example, you’ll be unlikely to sell them at full price after December. Discounting will allow you to make some money from the stock which may otherwise be wasted.
- If you have excess stock
If you sell clothing for example, you may have misjudged how popular some styles or colours may be. Perhaps there has been a particularly cold spring and it’s left you with far too many shorts and sandals. By selling the excess stock at a reduced price, you are making room for the new stock, which you can then sell at full price.
- If you want to match your competition
It’s not necessarily the best idea to discount just because your competitors are but you may feel in the short term it’s the right thing to do. You need to make sure that you are not cutting prices too low or discounting for too long. You still need to be profitable or you won’t have a business. Perhaps for a weekend you could offer a price match on like-for-like products?
- If you want to encourage new customers
A sale can work well to entice people to take a look at your products, especially if it’s people who haven’t bought from you before. The idea is that they buy something in the sale, like the product and you so much that they come back and buy it again at full price. This pricing strategy can also work if you’re a new business, introducing your products to people for the first time.
- If you want to increase revenue
If you are looking to increase your revenue, you can discount products with the aim of selling more. An increased revenue doesn’t mean that you make more profit but it depends what your objective is.
Does discounting work outside of retail?
Now we’re all used to retailers putting up sale signs, whether it’s on the high street or online.
But what about other businesses?
A personal trainer, florist or consultant can still offer a sale but the options will be different. Without a store front, the discount needs to be clear on your website, social media and marketing materials.
Prices can be reduced, multi-buy offers given and additional services provided.
Throughout the month of January, a personal trainer could offer a 30% discount on all purchases of a 12-month training package.
A florist might offer 30% off delivery for all bouquets during January. And a consultant may offer additional services at a reduced price if a new client signs up.
There are lots of options which can provide discounts for clients, whatever business you’re in. Whatever type of business you have, it’s worth thinking about discounting and how it could work for you during January and throughout the year.
Come and pay us a visit
We know that for many businesses, January can be a busy time. Planning for the year ahead, catching up from either a quiet or busy Christmas period and finding the time to complete your tax return.