Discounts are a timeless and essential part of any retail or service business. Promotions help accelerate sales and move inventory. But how do you write a discount offer to successfully bring in revenue without hurting your bottom line? To be sure it’s not the easiest thing. Nonetheless, with the right plan and focus, discounting can be a great sales tactic for your business.
Be strategic and use all available technology to figure out which items to discount and why to discount them. Implementing emotional and psychological strategies can work wonders for reaching your goals. Below is a definitive guide to writing successful discounts.
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Discount With a Purpose
Before you discount, know why you’re doing it. Establish your goals and intentions before implementing any discount promotion campaign.
Moving old stock is one of the most frequent and logical reasons to discount. Having old merchandise taking up storage space or hurting your cash flow prevents you from acquiring new in-demand products. This is especially costly if your business has seasonal or rapidly changing trends.
Additionally, many new businesses will use discounts for growing customer acquisition, driving traffic to their store or website. By enticing customers to consider their brand or product with price reductions and sales, companies can potentially gain some much needed exposure and market share. This can be even more effective if the promotional discounts are done smartly and strategically.
How to Use Discount Strategies for Small Businesses
Discounting must be a multifaceted strategic endeavor that utilizes all the available technology and information at your disposal. Here are some useful tools for promoting tactically.
Offer Discounts to Sign Up for Email Alerts
Offering discounts for signing up for email alerts that include price drops and special offers is a great way to acquire contact information of new customers. This allows you to push for immediate market share acquisition in the short term while ensuring retaining the customers email for future engagement.
Offer Discounts for Reviews
Incentivize writing reviews for your clientele with a discount reward. Potential customers take both quality and quantity of reviews into serious consideration before making purchases. Thus, offering this incentive helps kill two birds with one stone: you can generate more reviews while promoting future sales.
Email Engagement
Emailing targeted discounts can be a great way to reach specific customers and win back potential buyers with abandoned carts. Entice visitors who had already displayed initial purchase intent with a discount offer.
In addition, using unique discount codes within your promotional emails can allow you to track the exact redemption rate for specific offers and customers.
Write SMS Discounts
SMS has a 98% opening rate. Thus, it is a highly effective tool to reach your customers if you are able to obtain their phone number through order forms. Even if you have a brick and mortar SMB, you can use digital coupons like QR codes to encourage customers to come back into your store. Recent research has shown that digital coupons are more effective and popular than traditional print coupons for in store purchases.
Segmented Discounts Offers Are Great For SMB
In the age of information, customer and purchasing data can be put to great use for targeted marketing and discount writing. By using sales analytics and CRM technology, SMB owners can appeal to targeted customers for products that interest them specifically.
This segmentation can come down to age, location, personal preferences, and purchase patterns. Getting the most out of integrated POS technology, like KORONA POS, means that your sales data for previous years and seasons can show you what people buy and when.
For example, let’s say you own a liquor store and spring is approaching. You know that many customers are likely to stock up on wine like Rosé when warmer weather approaches. Here you can use your data to offer discounts on specific wines to specific customers who bought Rosé during previous spring seasons and get them back in the store.
How to Discount Without Hurting Your Margins
Offering discounts is great, but be careful to make sure that they don’t hurt your margins and bottom line. Implementing conditional discounts can be much safer for your company in order to make sure the numbers add up. Sometimes Buy One Get One Free (BOGO) type sales or multi sales will serve your company’s interests in a healthier manner than offering straight up across the board site discounts.
Returning to the liquor store example, let’s say you ran the same Rosé promotion but wanted to augment or condition the discount to move old stock. Here you could do something like “Buy One Bottle of Red Get Half Off A Bottle of Rosé.” Using your sales data will show you that wine drinkers are likely to drink red wine in all seasons. Therefore you can implement a more strategic discount campaign that moves old stock, bundles the sale, and gets more people in your store for the new spring season arrivals.
In addition, you can make the actual recipients of discounts conditional. Try running promotions for front-line workers, students, teachers, and veterans. As a conditional discount, this increases sales and traffic to your website or store without allowing all of your stock to be sold at a discount. Plus, your company will potentially gain some reputation as a brand that cares about offering civil servants and essential workers a discounted price for their societal contribution.
Emotional Aspects of Retail Discounting
Just as in pricing or branding, there is a huge psychological aspect to discounting. Sometimes the difference between someone pulling the trigger on a purchase has more to do with the appearance of the sale than with the actual discount being offered.
Promotional Timing
Running promotions during holidays and seasons with finite time periods can trigger potential buyers to bite on discounted items. Write a discount offer that makes consumers feel that by not making a purchase they are making a mistake. Think FOMO on your sale. This concept is backed by an actual term in psychology called “anticipatory regret.”
Use terms and conditions such as “while supplies last,” “limited-time only,” or highlight real-time item inventory countdowns. This makes customers feel a sense of urgency and time-sensitive opportunity. These limited-time offers can help drive high conversion rates. and generate new customers around holidays such as Christmas, Hanukkah, or even Valentine’s Day. Just be sure to be honest with your time conditions or your business can lose some credibility.
How to Discount Items with the Rule of 100
Jonah Berger, author and marketing professor at the Wharton School of the University of Pennsylvania, famously wrote about the “Rule of 100“ in his book Contagious. Summarized in his own words:
“The Rule of 100 says that under 100, percentage discounts seem larger than absolute ones. But over 100, things reverse. Over 100, absolute discounts seem larger than percentage ones.”
A consumer will be more attracted to a $40 pair of jeans that are discounted 25% rather than $10 off. Inversely, for someone purchasing a new TV that costs $600, a cash discount of $120 off will appeal to them more than a 20% off deal.
Stacking Discounts
Another psychological discounting tactic is called “stacking.” This refers to two separate percentage discounts “stacked” upon each other appearing to be greater in savings.
Harvard Business Review argues that offering “10% off + an extra 30% off” will appeal to customers more than a solitary 40% discount even though the latter offers more real dollar savings. For the lowest impact on your bottom line, make sure the lower percentage discount comes first, followed by the higher percentage offer.
Get The Most Out of Your Technology
Make sure to utilize any modern technology to the fullest extent when writing discount offers. This includes taking advantage of the best available software for product performance, customer purchase data, and inventory management.
A smart, integrated cloud-based POS system like KORONA POS will seamlessly optimize all of these features to help you hone in on what discounts will work best for your business and when.
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