Entrepreneurs are divided
In recent years, the skepticism of the business community about the use of discounts to stimulate sales has noticeably grown. And in this matter, there are claims not only of a practical nature - "discounts do not work", but also of an ideological one - "discounts spoil the market and the buyer."
If you find alternatives to discounts in your business, then it is quite possible to refuse them. That is, you need to decide how to manage the leftovers with an actively changing assortment (burn it like a luxury brand, or sell it?) And how to attract a new audience that does not dare to purchase your product before discounts. In principle, these are two basic tasks that should be solved by providing discounts.
Many entrepreneurs are afraid that their audience will stop buying goods before discounts. To prevent this from happening, you need to be able to bring a minimum of goods to sales - in this case, the client will understand that the design or size he needs may simply run out before the coveted discount.
Discounts, special offers are tools that you need to learn how to use. Make a separate decision in each case. This is not only a matter of marketing but also of production. Do not forget that any prediction can become erroneous, especially in fashion.
Like any tool, discounts and sales can benefit an individual business and the market as a whole, or they can cause equal harm. You should know the measure and be guided by common sense.
As for dumping, I believe that it is justified in any situation. Price competition is a road to the top. Ignoring traditional seasonal sales also seems unreasonable. In each area, such periods are different, but in general, these are New Year’s sales and other promotions dedicated to various holidays.
The best sales promotion method is a consistent, regular, and persuasive demonstration of the real value of the product. If a person has no doubts about the value of a product, the issue of the price will fade into the background for him. But no one knows if this path will be profitable.
If the main product is cheese. In retail, everyone is already accustomed to the fact that there are permanent promotions for “perishable products”: in bakeries, for example, an evening discount on morning pastries; for milk - for goods with expiration dates coming to an end. In certain business niches, discounts help get rid of a product that will soon become illiquid. In this case, it is appropriate to distribute discount cards for only one day. When opening new cheese shops, a discount allows you to attract a larger flow of people, especially those who are hunting for discounts.
A discount gift introduces a customer to a new kind of sauce or cheese that might keep them coming back to the store. It is difficult to attract people in this segment with discounts, especially small ones. When everyone around gives a discount of 50-70%, it’s hard to beat. But gifts are another matter, it is always nice to receive them.
Conclusion: a customer looking for a discount buys only a product or service at a discount.
Discounts and sales are certainly useful tools for business. Some regular customers are waiting for them specially. This is the part of the audience that cannot afford to buy this or that product at full price. Plus, discounts allow you to get rid of the old collection in a fairly short time.
The consumer pays attention to discounts if they start from 30%. Others prefer to reduce the price in two stages: 30% and 50%.
It’s not about the tool, it’s about the mind that uses it.
If a discount is distributed as an indicator of the formation of interest in a “premium” product, then this is evil for business, the distribution of profits to the population. Because, firstly, it forms discount consumption, accustoming people to a discount for nothing. Secondly, it devalues the product and makes the seller hostage to the discount.
A more correct alternative to discounts is working with product values. If you make the same product as everyone else, then yes, the only option is discounted. But we must remember that there can always be someone who has a greater margin of financial strength than you. Giving a discount is always easier than creating value for a product.
In the merchandise business, active dumping is usually involved when a product needs to be dumped before a new arrival. Probably, from a business point of view, this is justified: we remove the margin and give them at cost for the purchase of two things. Thus, at least partially, we compensate for the costs of the fact that this junk has been hanging on hangers all season. In services - in fitness, discounts begin to be included in the low season - from April to August and from November to February.
In the fitness industry, discounts are correct, which the consumer receives by purchasing cards at illiquid times, or by purchasing several types of access (family discounts, discounts for the company). Discounts for capacious purchases do not seem wild either - a contract for a year is cheaper than 12 contracts for a month.
Rebuild, niche, value formation - that’s an alternative. product approach. If we talk about fitness, then the focus is not on “go to fitness”, but on solving human problems. Each person goes to fitness to solve some kind of problem. Here is the solution to the problems and it is necessary to sell.
Dumping is when you sold high and then began to sell cheap. Dear entrepreneurs, start selling cheap right away!
Whether discounts are useful or harmful depends on the business. In general, it is not very pleasant to reduce profits, but if the question is “make the first sales”, “recycle or sell at cost”, it is still more profitable to sell. The same if you urgently need working capital, for example.
In general, a discount may be reasonable, but obvious dumping damages the product’s image and devalues it. Moreover, for some VIP goods, this is a dubious stimulator of interest - they will not take it, suspecting a dirty trick in quality. If we are talking about goods that do not have a shelf life - clothes, books, bed linen, total dumping is justified only in the event of the liquidation of the collection or the closure of the store. Depreciation is a bad story. Free shipping works well.
Discounts work well at certain stages of interaction with customers, they can become a decisive argument in favor of choosing our company or close potential buyers who cannot decide to buy.
Target promotions on certain groups of goods or services help to attract additional attention to new offers or products (example: 20% discount on mirror production), for which demand has decreased (example: small racks with a 20% discount).
Pre-order at a discount allows you to sell an item that is not in stock but is under production. The discount compensates for the inconvenience of waiting for the item to be ready.
Discount when buying three or more items of the same model. Example: wooden letters and numbers, the discount on which encourages you to make longer words from letters and get a certain number of letters for free.
A loyalty program (a certain amount of purchases) is our gratitude to returning customers.
In general, discounts are justified in several cases:
- when introducing a new model to the market;
- with a seasonal decrease in demand, in our case - in winter and summer;
- in case of accumulation of goods in the warehouse, which for some reason are slowly sold.
- to close long open trades. Buyers like the product, but are not ready to buy at full price.
The main alternative to discounts is to correctly and systematically communicate the value of the product to the buyer, to inform. At the beginning of the interaction, it is not clear to people why the price of our goods is the way it is, or why the cost can differ by a factor of two. This understanding comes when we tell the story of the material, show the labor-intensive production process, share the details of pricing. Having learned about all this, the respect for the item on the part of the buyer reaches a new level.
In general, the loyalty system works well - when a regular customer receives not just a discount, but the opportunity to use some kind of privileges, internal closed offers. Free services to increase sales.
Many still believe that it is better to keep the price low than to discount. But the market dictates its own rules and no matter what price you keep, people will always react to red price tags and best prices
. Therefore, we decided to accept this reality, but without cheating and inflated prices.
We participate in big sales like Black Friday or Cyber Monday. But we still try not to make discounts without reference to the event. However, this is more likely due to the small assortment. When it increases, perhaps the attitude towards discounts will change.
A discount is a good tool that you need to know how to use. If the discount is the basis of your strategy, then you are a discounter. There is nothing wrong. But if you apply discounts one-time, and a small business, most often, does it in a panic in the absence or decline in sales, then you can only get a positive effect by accident.
Discounts are a very cool tool, the main thing is to understand how to use it in a particular business and market, and whether it is needed there at all. When selling luxury appliances to the premium segment, there is no point in giving a discount, making your product cheaper in its eyes. He came to take the best, he does not need cheaper. The same budgets that you can spend on discounts can be spent on providing a service that satisfies the feeling of superiority in the buyer. Comes out more efficiently. On the other hand, there is nothing wrong with letting you try your services for the first time much cheaper to dispel doubts about how it works.
In short, a discount is a great power, but also a great responsibility. For example, social discounts for pensioners in grocery stores during working hours are genius. The client is satisfied that the queues have become smaller, there is no downtime, and overall brand loyalty is increasing.
Each promotion and discount must have a specific purpose, otherwise, it will not make sense. Promotional discounts have a positive effect on user reactivation or, for example, on off-season demand. A discount on a trial service increases the conversion to activation. Bundle discount encourages retention.