It’s a common strategy for retailers and brands to use discounts or promotions to grow the business. If done properly, periodic and seasonal discounts can help increase demand during slow periods, clear stock, acquire new customers, generate customer loyalty and boost long-term profitability. Be careful: if done the wrong way, promotions may end up de-valuing your brand and your products.
So, how should you use discounts, offers or promotions to achieve your specific business goals and revenue targets? Let’s take a page from some specialists in the field: supermarkets and grocery stores. Supermarkets are known for the large number and variety of offers, discounts and deals they regularly use to generate the high volume of sales needed. Because of low margins on many grocery items, supermarkets have to select the right type of promotion or discount that will help them profit and achieve their sales goal for that period of the year.
Here are four strategies, taken from supermarkets, to help you decide what is the right promotion, discount or deal to implement depending on your specific business goals:
Goal 1: Acquire new customers
Many supermarkets use temporary discounts as a gateway to selling other products than the actual ones on offer. Flash sales are a type of promotion that allows you to change the price of an item for a very limited period. They can act as a “hook” to attract new customers, driving instant demand as they create a sense of scarcity for an item. For example, a 12-hour flash sale on a popular household essential (for example, a sale barbecue grills on the first day of summer – or the weekend before a big game) will get new customers in the door, and likely result in a full grocery store – as once they are there, customers may decide to add a few more items to the cart, or even do their weekly shopping out of convenience.
These types of sales are a great way to create buzz and foot traffic during slow periods of the year. They can also be used as a differentiator during the busy holiday season.
Goal 2: Retain existing customers
Implementing a customer loyalty program can be a smart way to satisfy your customers’ need for savings on the one hand, and build a long-lasting connection with them on the other hand. Many supermarkets offer a membership card that qualifies the customer to receive lower prices and discounts. This creates a win-win situation where your customers feel happy about saving money regularly with their loyalty card, and you get to reap the rewards of repeat business – all the while collecting valuable customer data. By using the information you get from your loyalty program, you can for example understand which items are most commonly sold together or how specific products are more popular with consumers of a specific gender or age. You can then use this information to predict buying habits, improve your purchasing, create more targeted promotions and optimize your pricing strategy.
Goal 3: Keep your customers coming back
Returning and repeat purchasers represent a large piece of the pie for retailers. According to Inc, current customers spend an annual average of 67% than new customers! So you’d better make sure you keep current shoppers happy, and give them a reason to return. Dollar or percent discounts can be an effective way to stimulate repeat visits. By enabling customers to save a percentage or a fixed amount – say $20 off any purchase over $100 – on their next order, you are giving them a direct incentive to return in the short-term. To make the offer even more enticing, use your intelligence and offer your customers targeted offers and promotions on products or lines you know they’ll be interested in.
These types of offers can be regularly used year-round, or strategically offered to new customers after their first purchase.
Goal 4: Clear stock for the next season
Volume-based discounts are a great option to choose when you are trying to move specific inventory. When it comes to supermarkets and convenience items, customers are motivated by the fact that the more they buy, the more they save. You can also experiment with bundling products together as a combined offering, for example, using the demand of the primary product to sell the secondary product. My local supermarket often uses this strategy to encourage sales of slow-moving (and, as is often the case in grocery, quickly spoiled) items: for example, packaging together a “mojito kit” (long glasses, limes, mint leaves, soda water, sugar and ice) when the shop has a lot of fresh mint to sell.
Optimize your offers and target your customers
The two most important questions to ask when it comes to delivering targeted and profitable offers are:
- What are my business goals?
Depending on what you want to achieve, you should then select the right type of offer or promotion that supports your objectives.
- Is my technology up to scratch?
Your retail management system must be strong and flexible enough to enable you to handle multiple types of promotions at the same time, create personalized offers, and track your results. If it isn’t, it’s time to start looking around for a software system that can support your business with a strong offers and promotions engine.
Find out more about how to choose the right retail management software solution that helps support your goals in our whitepaper.