How can promotions be bad for your business
When we are planning our sales strategy for a business, we could tend to think that discounts are always positive because people like them and well increase sales and customer satisfaction, although these are potential positive results we need to ask ourselves if the total discounts that youre giving generate enough value for your business.
– When are youre losing money through subsidize sales:? You have to keep in mind that not all customers that bought with a discount bought BECAUSE OF the discount, here is an example: Mary is a loyal customer of your bakery, she spends $20 in bread twice a week, she visited again this Wednesday, but because you had a discount, she only paid $17 instead of $20; what would have Mary done if there was no discount? Buy anyway! $20 – $17 = $3.
When most of your customers are in that situation, promotions are not always the best choice.
– When is subsidizing worth it? There are other factors to consider for promotions, and their value such as new customers generated, client satisfaction increased or maybe even sales of other products increased due to more traffic in your store/website, etc. Even if youre technically losing money, these benefits can be worth it.
With a deep analysis of sales data, it can be determined how much of your sales are subsidized and if promotions are worth it. But until you start doing that, here are some tips:
–Watch sales results with different price points, you might notice that a lower discount may not bring a proportionate increase in sales.
–Do not abuse discounts in order to increase sales, a product that is always on sale can end up having a lower perceived value in the eyes of the consumers.
–Keep an eye on how much your competition is discounting, but carefully study if you want to follow their path.
What is your experience with discounts and promotions? Either as a customer or as business owner. Please comment below.