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The Mechanism of Discounts in a Marketing Strategy

The Mechanism of Discounts in a Marketing Strategy
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You must have thought to yourself, how do companies earn if they reduce the cost of the products they sell? In this article, you’ll learn how discount pricing helps businesses and how it can damage a business if not done right.

Here are 2 things that can help you guarantee that discount pricing will benefit your business rather than hurt it. First, you need to set firm objectives and know the different approaches you can take to reach them. Second, you need to compute the right metrics to ensure that you reach your goals. Read the rest of the article to know how to discount your prices, set the right goals, and the best ways to make responsible discounts and profitable sales results.

Benefits and Advantages of Discount Pricing as a Marketing Strategy

  1. Having discounted prices can drive more sales to your business. It can also bring in new customers.
  2. Make customers feel positive about your business. People are keener to spend on things that have special offers or discounts because it allows them to save money. Saving money leaves a positive feeling to customers as they feel happy about their purchase instead of feeling guilty for spending money. It is beneficial to your business because they will associate good feelings towards your brand.
  3. Customers will choose your brand over the competitors. Price is a huge factor when choosing between products. Having low prices is the push customers need in order to choose your brand.

Drawback or Disadvantage Of Discount Pricing As A Marketing Strategy

  1. Discount pricing can lower the perceived value. It can cause customers to think that your product or service is of low quality. Although this does not happen all the time and is highly unlikely, it can be a risk.
  2. It is possible not to profit as much or not at all. Discount prices are usually for people who wouldn’t have bought but it becomes a drawback when people who bought would have bought anyway even without the discount.

Objectives You Can Set Before You Discount Your Prices

  1. Acquire new customers
  2. Increase your sales
  3. Gain repeat customers
  4. Get rid of old inventory

How to Ensure Profitability When Using Discount Pricing As A Marketing Strategy

  1. Margins – compute if you can still profit even with discounted prices.
    • Keep your marketing costs low – you need to promote your discount but make sure you don’t overspend doing it. You can do this by marketing your discount with leads you already have like subscribers, likers, or followers. These are basically customers you already have. This is best if your objective is to gain repeat customers.
    • Segment your offers – this is for when you want to target certain people. This can be used if your objective is to acquire new customers. You can offer discounts for first-time customers.
    • Offer Upsells – offer things that are not discounted but things that you think customers will like. This is good if your objective is to get rid of old inventory.
  2. Customers Acquisition Cost
  3. Targeted Sales Volume

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Filed Under: Small Business Marketing

About Dragan Sutevski

Dragan Sutevski is a founder and CEO of Sutevski Consulting, creating business excellence through innovative thinking. Get more from Dragan on Twitter. Contact Dragan

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