Sales, specials, discounts and one-time offers are often a quick, simple way to boost your business. They help you attract new customers, offer long-time customers a reward for their loyalty, and encourage occasional customer’s incentive to buy more items. An added bonus, sales can help you move excess stock that’s taking up valuable space earmarked for new products.
Reduced price offers are, however, risky business. Offer too big a discount and you won’t make any profit; offer too little discount and it hardly seems like a deal. Here are three ways to tackle a special to help maximise your profits.
1 Crunch the Numbers
The first thing to do is to work out the golden median – what discount will allow you to still make a profit but will seem like a worthwhile deal to customers? This is where a good understanding of your income, expenditure and cost of sales comes into play. Depending on how big your profit margin is, you could potentially offer a significant deal. If it is a small margin, you need to be careful to take into account the hidden costs of the product, like warehousing costs, shipping, and other money already spent. Don’t be afraid to ask your accountant to help you work out the figures.
2 Find creative ways to offer a deal
It’s not just about slashing prices. Sometimes, you could gain more effect by offering a bundled deal, where two complementary items are sold together for a small discount, but in a way that showcases the benefit of having both. Alternatively, you could offer discounts for quantity – buy three, get a fourth free, or buy bulk for a discounted rate.
You could also offer discounted rates to specific groups. For example, a retail store offering senior citizens certain items at cost price on one day a week would encourage them to buy several additional non-discounted items during their shopping. Another situation, an internet service provider could offer registered university students a certain amount of data per month for free. It pays to be cautious with these kinds of deals, though – they should be limited time offers, as long-term discounting could cause you more harm than good.
For service-oriented businesses, you could consider offering certain customers a retainer deal – they get up to a maximum amount of hours or service from your company for a fixed rate every month, which can certainly help in the quieter, leaner months of the year.
3 Go seasonal
Depending on what you’re selling, you could consider offering seasonal deals. A clothing retailer catering to school kids could offer special deals at various times of the year – back to school or beginning of the vacation. A service-based operator could offer an annual discount to long-term customers at a quieter time of the year to encourage additional business.
Lastly, a little tip – be very careful of offering reduced prices when your cash flow is tight. You could end up doing yourself more harm than good. It may seem like a great way to drum up extra sales, but unless you are sure of making that profit, it could be too big a risk for your business.