When small businesses are looking to move their sales figures, one of the most common approaches they take is to offer a discount.
However, unless you plan well, your discounts might end up damaging your brand or cutting into your profits.
It is important to first set the goal you wish to achieve by offering discounts on your products. These could be:
- To acquire new customers
- To increase your sales
- To gain repeat customers
- To get rid of old inventory
Once you determine the goal, you can opt for any one of the below strategies for discounting your products.
Discounting Strategies For Small Businesses
Here are a few discounting strategies small businesses can use!
1. Bundled Discount
For this discount, rather than lowering the selling price of one product or service, you lower the price of a group of items bought together.
The bundled sale comes with a few benefits:
- Bundling Increases the Number of Items You Sell – Since you’ll be selling several items within a single order, each sale means more items sold, more revenue per order, and lower costs per order.
- Sell Popular and Less Popular Products Together – Bundles also allow you to sell less popular products with stronger selling products. You can leverage the popularity of your best-selling items by enticing customers to buy it with other items at a discount as they’re making their purchase.
- Customers Get to Try Your Other Products – Some of your products might have been marketed more extensively than others. If your other products are of equal or superior quality as your most popular products, encourage customers to try them by bundling them together. You’ll need to measure the sales of the less popular varieties, to see if they’ll increase after the discount.
However, when planning bundled discounts, you need to carefully study which products will be bundled together.
2. Prepayment Discount
You can also offer a small discount for people who can pay for the products and services in advance, perhaps months or weeks before they are shipped or received.
Prepayments can help build cash flow since customers are encouraged to pay earlier. You can use their advanced payments to purchase additional inventory, to buy supplies in bulk (probably at a discount), or make other investments.
However, prepayments don’t work with all types of businesses. Only products or services that need recurring payments can benefit from this.
3. Volume Discount
When you offer a volume discount, your customers end up paying less per item as long as they buy a larger amount of that item.
Because you’re enticing customers to buy more units per order, volume discounts are a good option if you’re looking to clear inventory or increase the average value per order.
4. Event/Seasonal Discounts
Event-based discounts tend to happen around a specific date or season, and they are often recurring.
During holidays or special discounting days, most people tend to be in a “buying mindset”. Your business can have a share of that influx of consumers if you offer discounts during these times. Seasonal discounts can also help businesses shed out-of-season inventory.
But because these discounts are often created to let go of inventory or attract new customers in a larger scale, these aren’t meant for high-end brands. You’re likely to attract bargain hunters rather than loyal buyers.
5. Free Shipping
Another type of discount is offering free shipping. Free shipping can also lessen your cart abandonment rates.
But the danger with free shipping is that packaging and deliveries cost. Not charging for shipping can hurt your business if you’re working with low margins or if shipping costs aren’t factored into your product prices.
6. Buy One, Get One Free
Sometimes, a discount isn’t enough to get more customers. But if you offer something for free, you’re sure to attract more interest.
You don’t have to stick to “buy one get one free”, per item either. You can offer a completely different item for free, pairing a popular high-margin product with a freebie that’s less expensive to produce, but hasn’t sold well.
Because of how simple and attractive “buy one get one free” is, it’s great for attracting impulse buys, moving inventory, or pushing the sale of less popular products.
To make sure that you’re growing rather than losing income from discount pricing, make sure you keep your margins intact, maintain a sales target that makes up for potential losses from discounting, and factor in the cost of acquiring customers.
If you are on the lookout for funds for your small business, get in touch with Gromor Finance!