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We all know it. Our attention is caught by a good offer, which in no time at all, helps to significantly increase our desire to buy. Therefore, it is not new that most companies, at some point, choose to use this tool to boost sales, especially in periods where turnover does not quite live up to expectations. We must realise that unfortunately, it is all too easy a solution to wave the discount sign, which is especially true for smaller companies that are still in the process of establishing their brand.
As experts, it is important that we do not forget our responsibility when we, together with the owners and marketing managers of companies, try to crack the code for scalable online sales. In this context, we must admit that the temptation to run discount campaigns is often very difficult to resist, especially when the focus is often on improving the company's turnover here and now. In order to create better conditions to decide, whether or not discounts are something for your company, we have gathered some very basic recommendations and considerations, which we at Algorize, ourselves have had good experiences following.
Disclaimer: Our recommendation to both companies and agencies is always to carefully consider the consequences before launching the discount campaigns. Following a good approach and strategy, discount campaigns can be an effective solution to increase sales, both in the short and long term.
"It doesn't hurt anyone to run a quick little discount campaign" - it actually does! Because often one forgets to take the loyal customers into account, who recently paid the full price for the product. In the end, it is these customers who help keep the company running, and it is therefore important to always have these customers in mind before the discount campaigns are launched. For example, remember always to exclude previous buyers in your discount campaigns, if these are promoted via Facebook's advertising platform.
The duration of the exclusion should, to a large extent, be determined by the typical purchase cycle of the products. Our general experience says that 30 days is an appropriate length if you want to ensure that the loyal customers do not feel that they missed out.
Remember that discount campaigns can lower the true value of the products, as perceived by consumers. Therefore, the campaigns will in many cases lead to a significant drop in turnover, as soon as the campaigns are over, and thereby put a sudden stop to the positive momentum that was otherwise created on the basis of the discounts.
One thing that companies often forget when looking back at the great turnover figures after Black Friday, is to dive into the numbers to take a closer look at the profit by the end of the day. Because even though one often feels the discount percentages are spent relatively well, compared to the great increase in turnover, remember that the discount, in most cases, is taken directly out of the profit. Only for big market actors, such as Matas, will it often be possible to negotiate special discount agreements with the suppliers, so that the company ensures that the campaigns do not have a significant negative impact on the profit.
As a small player, on the other hand, one must often pay the same purchase price, even though the products are bought specifically for discount campaigns. Thus, only the shipping costs and turnover are left to adjust, which means that the discount is most often given directly from the profit and thereby contributes to a negative impact on the competitiveness of smaller companies.
Before getting too locked in on discount campaigns being the solution to all the company's challenges, you can profitably consider alternative methods to create added value for customers in relation to purchases. This can, for example, be by giving the customer an extra product or service with the purchase, which is not too cost-intensive.
However, it is important that the product or service creates some form of added value for the relevant customer, as the effect otherwise would be marginal. In the end, it is all about knowing your target group well enough to decide which services or items have a high value for the customers. If you as a women's clothing webshop know that the majority of your customers read a specific fashion magazine, then consider the possibility of adding the latest copy of the magazine in the order, if the customer spends x amount of kroner. In such cases, it will often be possible to make a good deal with the publisher of the magazine, so that the initiative is not too costly.
Another option could be to offer a nice and exclusive gift wrapping, which thereby appeals directly to people looking for the perfect gift, without sacrificing too much time and preparation.
The sky's the limit when it comes to creating added value instead of giving discounts. Therefore, be creative, but always focus on the interests and needs of the target group.
When all is said and done, we know the trajectory we are heading. A lot of the big players have accustomed consumers to discounts on every product, which makes it difficult for the small players in the fight for valuable customers. Therefore, we would like to finish off by giving 3 alternative suggestions, which can have a good effect, without having too much impact on the previously mentioned problems.
1. Increase the order value with bundled offers
Bundle offers can be good and effective at increasing the order value, and at the same time ensure that loyal customers do not feel disregarded for paying full price on the product. This method can also be used if a company has a lot of retailers giving discounts to online customers.
2. Create an online Outlet
Even though the concept of "outlet" in many cases is used as another word for sale, it can be an effective way to run some discounts and attract new customers to the website, without compromising the brand. For example, by creating an outlet or "last chance"-section on the webshop, it is possible to sell off excess products that just take up space in the warehouse. Remember to consider how the company's outlet is communicated in the ads, as an aggressive approach can quickly have the same effect as if you use the words, "sale" or "offer".
3. Time-limited sale
Unless you always have a new offer running (which for many smaller players is a difficult strategy to master), you will, as mentioned earlier, often experience a significant drop in sales as soon as the discount campaigns are over. This is especially the case if you ran long-term offers on large parts of the assortment. One method to overcome these challenges is to run offers, with a very specific time limit of 24 or 48 hours for example. This makes it possible to achieve a boost in turnover, without impacting overall profit too much, as well as the perception of the brand.
Since discount campaigns both have major disadvantages and potentially great advantages, we would like to emphasize the importance of the company having made some clear considerations about how to use this tool. Therefore, always think long-term, even though this can be difficult due to pressure from the outside world. We experience time and time again that our customers who choose a clear approach, whether it is a discount strategy or not, achieve the greatest success."
