Discounts and you, here we discuss discount pricing strategies
Discount pricing strategies
Be you a seller or a buyer discounts are part of our life.
As a buyer it is your duty to buy as well as you can but
we must always leave something on the table for the seller.
I am unsure how things are around your way but in many places suppliers are struggling.
Some of it is their fault because of the discount trap.
When sales are slow the seemingly obvious solution is a sale. Offer discounts for buyers to flock in.
Over the years the sales have become more plentiful and offering better discounts across the board.
We as shoppers now wait until the discount season to do our shopping, therefore, exaggerating the problem.
Yes, some stores buy in a bundle of cheap products to sell on special or try to quit last season stock so that you are buying winter gear coming into summer.
On-Line shopping has changed that. The seasons vary with sellers and it is far easier to price shop online than tramp through stores.
Here in Australia, we have witnessed about a dozen Chain stores going to the wall, international brands that could not survive the changes in the marketing methods
To top this off customer service has dropped as shops save on staffing levels so the traditional advantage of service has also eroded the sales.
As a small business, how can you hope to compete?
First off all let’s look at some of the more radical changes that will impact you.
The Amazon monster is a force to be reckoned with. No stores, cheap products, worldwide delivery. Hold that thought.
Uber eats, Fresh food home deliveries, prepackaged meals delivered to your door.
Let’s not forget Aldi and Ikea or similar ventures that operate on pricing that you cannot meet.
Ok, online shopping also has an impact because of convenience.
Loyalty programs that offer customer opportunities to buy more to save more and the new Annuity shopping concept by Shop.com, you earn from others shopping.
After Pay has seen to be a necessity in sales
Discounts, discounts and more discounts
So you drop your prices by 15% how much more do you need to sell to break even
| Checking the effect of discounts on the gross margin | |||||||
| If you cut your prices by… | and your present gross margin (%) is… | ||||||
| 0% | 15% | 20% | 25% | 30% | 35% | 40% | |
| 5% | 50.0% | 33.3% | 25.0% | 20.0% | 16.7% | 14.3% | |
| 6% | 150.0% | 66.7% | 42.9% | 31.6% | 25.0% | 20.7% | 17.6% |
| 8% | 400.0% | 114.3% | 66.7% | 47.1% | 36.4% | 29.6% | 25.0% |
| 10% | 200.0% | 100.0% | 66.7% | 50.0% | 40.0% | 33.3% | |
| 12% | 400.0% | 150.0% | 92.3% | 66.7% | 52.2% | 42.9% | |
| 15% | 300.0% | 150.0% | 100.0% | 75.0% | 60.0% | ||
What this tells you is that if you discount by 15% with a 30% margin you have to sell double the sales to make the same money, frightening is it not?
Be selective in discounting
Old stock, slow movers, damaged, out of style anything to roll over the loss makers.
Online shopping.
Nearly anyone can do it. It is not easy but the latest software products increase your chances greatly.
You need to market the heck out of it to be noticed and put up with returns and questionable faults.
Customer service
This is the KEY
If you can solve a problem, fulfil a dream, allay their fears or fix a failure you are in front of the game.
This is where you can excel and hold your own against even the biggest. like Amazon, no service just cheap products.
Concentrate on the buyer and find the currency that will promote a sale.
Discounts
Why not bundle products, value-add a product, make it exclusive, bulk sale, accessorize a product
Do something different but discount only for the correct reasons.
A drawcard product can work. You slash your price on a good sort after product so they come into the store. A local fruit and Veggie store discounted Coffee to a new low level to bring in customers. This worked really well although many only came for the coffee. You still need to try the market
Seasonal
The slow and dead stock needs to be turned over
Stock turn over
A change in your methods of moving stock can result in more sales.
Look at all the new marketing ideas and see where it can be changed to benefit you.
Free delivery, after pay, loyalty, online, exclusive range, novelty, incentive, Limited release, seasonal events.
Bundled, packaged, marked, bulk, accessorised up To name just a few.
Discount your good stock as the last resort because it costs you money, time and effort.
Discounts and you
I hoped this helps you
Peter Hanley
