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.
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.
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.