It’s that time of year again when shoppers are shoving their way across overcrowded aisles for the best deals they can find and retailers are fighting tooth and nail for every dollar in customers’ wallets. The six weeks between late-November and early-January is a vital period for retailers, one that can determine whether they live or die as a business entity. This is the time of year when prices hit rock bottom.
There is nothing inherently wrong with discounting, if done right. Consumers will always be attracted to the idea of saving money. The problem is that many businesses are spending too little time thinking strategically about promotions — presuming that giving money away simply has to work. This is a pity, because a carefully crafted strategy can do so much for a business. For starters, it can keep retailers out of trouble this holiday season.
Brands can be easily destroyed by thoughtless discounting, just as a well-executed campaign can do wonders for the bottom line.
Here are seven tips for a well-executed price promotion drive.
It is a conversation starter. Slashing prices should be much more than a simple incentive to buy. It can be used cleverly to grab people’s attention and start a conversation about a particular product's merits or even about the company's own values and reputation.
It is selective. Do not try to appeal to everyone. Being selective is no crime. Focusing on a certain demographic can ultimately create more sales opportunities than a blanket, indiscriminate promotion and, if done properly, can strengthen a company's standing.
It is contingent. Don't give money away too easily. Make consumers sweat for it by asking them to perform some ancillary behaviour that reduces your costs (e.g., buy online, not in the store), increases your revenue (e.g., buy two units, not just one), or ideally does a bit of both.
It enhances the brand. Price promotions are generally perceived as the anti-brand. But this doesn’t have to be the case. Instead of using discounts to coerce, use them as a reward for behaviours that are consistent with the values espoused by the brand. Such an alignment can enhance the brand in the eyes of customers. .
It is exclusive. One problem with discounting is that a simple price intervention is easy to copy (and typically is). To gain a window of exclusivity, think of ways in which the promotion can be made memorable. One example is to brand the campaign itself.
It is robust. Every promotion needs a baseline level of sales you can trust. Without it, there is no benchmark, no reference point to judge performance. What steps have you taken to ensure that your baseline is valid?
It is disciplined. Create a disciplined exit plan before the promotion is launched. Decide in advance on the warning signs from the market that would trigger the withdrawal of the promotion, as well as knowing what the goal is.
With the holiday shopping season upon us, following these tips will help to keep shoppers spending and the retailers out of trouble.