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How business can stay profitable in a discount world Posted on March 16, 2021
We live in a consumer savvy world, where consumers hunt down the best prices from the comfort of their lounge rooms, and anonymously review products and services with the click of a button.
It’s no wonder price discounting is so common – businesses are competing to provide the best quality and value. It can be a good strategy for attracting new customers or bringing inactive customers back, and moving large stock volumes. There are a few things to consider though…
Before slashing prices, you should ask yourself the following:
- Why are you doing it? To move stock? Reward and engage existing customers? Attract more customers? Encourage product trial? Engage inactive ones? The answer will help you design your approach.
- What is your current profit margin on the product/service you wish you discount? How have sales been tracking? When is peak sales season for that product?
- For how long do you intend to offer the discount? Discounting is not usually a good long-term strategy.
- Is your discount compelling against what your competitors are offering?
- Who are you trying to attract? What will appeal to them? How will you reach them? How are you going to keep them once they buy your discounted product/service?
- Is a flat-out discount the best strategy? How would a bundle discount or rewards discount strategy perform, where customers are rewarded for their loyalty?
- Is the discount undercutting your brand and product value? If the discount is too generous, the perception may be that it is worth less.
- How are you going to introduce or reintroduce customers to your broader product/service offering? What will they see/do/feel/experience when they purchase the discount items? This is an opportunity to showcase your business, brand and products for a more engaged customer base that is not dependent on a discount in the future.
Accounting software enables strategic mapping of pricing strategies for maximum annual profit and healthy cash flow. This then becomes part of your sales and marketing plan for the year.
For advice on pricing strategies and profitability, book a complimentary introductory meeting on 02 4320 0500.