Discounts are a good marketing tool in special situations. They can be temporary or permanent, but they should be monitored to be sure you’re getting the results you intended. Don’t have so many temporary discounts or special sales that you give the impression that your regular price is much too expensive. Also, why would people ever buy at the regular price if they know that a discounted price or sale is coming in a few days or next week?
Discounts can be an effective tool when used for a specific purpose that adds to your bottom line either directly or indirectly. Here are some reasons for discounts:
- Excess or old merchandise. Perhaps you ordered, stocked, or produced more than you anticipated, and you need to sell the items because they may be obsolete soon.
- Seasonal sales. Perhaps the golf or camping season is over, or you have clothes that will be out of style by next year. These items take up valuable selling space.
- New products. When something is new and innovative, you need people to try it and talk about it. This is also the perfect time to send press releases.
- Larger quantities. This is a common practice in business to business sales: buy more and save more. Is there a way to adapt this to consumer sales?
- Senior citizens and students. Offering discounts to specific groups can build more sales volume and bring public
awareness and goodwill to your business.
- Perishable items. Selling at reduced prices is better than disposing of items whose shelf life or expiration date is nearing the end.
- Supplier discounts. Perhaps your supplier offers you a big discount that you can pass on to customers. Ask about these regularly and use them.
- Building volume. You may want to increase volume and sales so you can receive volume discounts from your suppliers.
- Increase cash. When your cash flow needs a quick boost, and you have a lot of product on hand, discounts can be a
quick, productive tool.
- Prompt payment. Speed up accounts receivable—a discount for payment by a certain date works in many cases. Offering free shipping and handling is another idea.
- Cash now. If you’re in a business that usually invoices, try a discount for cash in advance or cash on delivery.
- Competition. When your aggressive competitors have reduced their prices, you can meet or exceed the discount. Just be careful not to start a price war where everyone loses.
- Loss leader. Products can be sold at cost or a little less to encourage buyers to purchase other profitable items.
- Advertising strategy. When you’re starting a campaign, sales and discounts draw attention to your ad, create interest, and help make your ads successful.
- Point-of-sale. When you have a customer who is on the verge of buying but needs a nudge, offer a small discount if the customer buys now.
Discounting should be used—not abused—for successful results. It would be great to see a line outside your door, waiting for you to open, because of a special sale. But if you have that sale too often, your sale price will soon become your regular price. The lines will dwindle, and you’ll be back to business as usual but at lower margins. Make it known to consumers why they’re getting a discount and make a big deal about it.