How to Build Effective Sales & Promotions Into Your Retail Strategy
In the retail world, sales and promotions are a big part of pricing strategy. Deciding which items to discount, when, and by how much isn’t a decision you should take lightly.
A sale or promotional offer here and there might not seem like a big deal, but the way you use sales and discounts in your store has a big impact on your bottom line as well as how customers perceive your brand.
The main thing you should avoid is over-discounting. Over-discounting lowers your brand’s perceived value and sends a message to customers that your product isn’t worth the full price. Or it could create hyper price-sensitive customers. For example, if you receive years of emails from a retail store offering 50% off, it’s unlikely you will buy anything at full price. You may also alienate customers who already paid full price. Buyer’s remorse strikes quickly when you buy something only to see it the following week on sale for half-off.
Promotions That Will Boost Your Bottom Line
You can prevent those issues by building sales and promotions into your pricing strategy. Offering discounts in your retail store can be a really effective way to boost foot traffic, convince shoppers to buy, and improve your sales more generally. However, it’s important that you don’t let your offers cut into your bottom line. When you create special offers with your store and goals in mind, you’ll actually grow your business.
Free Gift With Purchase
One of the potential pitfalls of discounting your products is that you lower what customers think they’re worth. Instead of lowering the cost of an item, try adding more value for the same price. When you offer a free gift with a purchase, customers spend the same amount, but feel better about it because they’re getting more value.
Besides creating a more valuable offering, customers love the word “free.” Even just including the word “free” in your promotional language is a huge motivator for getting customers to buy. Even when a discount off would technically save customers more money, they usually prefer getting a free gift instead.
Buy One, Get One Sales
If a free gift gets customers to buy, then a buy one, get one (BOGO) sale can convince them to buy more. Similar to the free gift offer, BOGO sales are all about adding more perceived value, instead of discounting your product’s value. Since customers purchase the first item at full price, that’s the value they associate with it. This type of sale is particularly useful when you need to make room for new products like at the end of a season.
Just never offer a buy one, get one free promotion unless you seriously need to move some inventory. Otherwise, you’re handing out free products to customers who may not even want them.
Percentage or Dollar Off Discounts
Percentage or dollar off discounts can boost sales and draw customers into your store without cheapening your overall value in the eyes of customers, but you have to use these sales wisely and at the right time. Keep money off discounts in the realm of 15-30% in order to keep the product’s perceived value and be sure to give the sale a defined end date, after which the item returns to full price.
To get the most out of this type of promotion, you have to know when to use discounts as a percentage and when to use a dollar amount. Generally, percentages are the most effective for products less than $100. For those over $100, the actual dollar amount is more likely to draw customers. To put it another way, whichever number is higher (the percentage or the dollar amount) is the one you should promote to shoppers.
Tips for Successful Sales
Once you know which type of promotion works best for your store and your products, there are a few other things to keep in mind. These apply to any and every sale you offer, and they can help you create more effective promotions that boost foot traffic and sales.
Keep your goals in mind.
Whenever your store runs a sale, you should have a clearly defined goal for that promotion. The type of sale you choose—whether you want to bring more customers through the door or sell off old inventory—should follow that goal. For example, BOGO sales are great for moving inventory.
Tap into retail psychology.
There’s a lot of research out there surrounding the psychology of retail. Use it to your advantage. For example, shoppers are drawn to prices that end with the number ‘nine’. In an experiment by MIT and the University of Chicago, researchers tested the same article of clothing at $34, $39, and $44 price points. More shoppers made a purchase at the $39 price point, even though it cost more.
Use a minimum purchase amount requirement.
You already know about the danger of over-discounting. One natural check on that is to base the promotional offer on a minimum purchase amount. Something like “Spend $150 and get $20 off” can lessen the impact of promotions on your bottom line and get customers to spend more to reach that threshold.
Create urgency around the sale.
In order to maintain the perceived value of your products at full price, sales and promotions should always have a clear end date. When you communicate this to shoppers, you also build a sense of urgency around the product. Another way to build urgency is by limiting your stock of the promotional item.
No matter what conditions you set on your sales, you should be transparent about them. Don’t advertise 30% off only to tell shoppers at checkout that it only applies once you spend $100.