Hello there, friends of the Community! I hope you're all doing well. While you're here, I'd like to share an article with you all that was shared on the QuickBooks Blog. This particular post covers the details of promotional pricing for small business. Let's take a look...
First things first, our promo definition: "Promotional pricing is a sales strategy in which a business temporarily lowers a particular product or service’s price point to attract prospective customers. In many cases, this lower price orientation creates a sense of urgency that prompts people to purchase before the price goes back up."
Now that we know what it is, let's dive into the pros and cons of these types of mark-downs:
Pros
- More customer traffic: The post mentions there are far more budget-conscious people than there are free-spenders. When prices are marked down you're guaranteed to see more people shopping with you.
- Increased value perception: Marking sale items can impact your customers perception of value. They're inclined to go for the deal, even if it's only a small percentage taken off, therefore increasing sales.
- It’s a low risk, low-cost strategy: Rather than spending potentially thousands of dollars on a new marketing campaign, try a limited-time promotional discount to bring new customers to your door.
Cons
- Lower profit margins: Discounted prices area great way to increase sales and move product quickly, but on the other hand it is not a sustainable pricing method. Your margins will be lower and most businesses can't afford that to happen for extended periods of time.
- Potential price wars: If you're competitors also have a sale, then you drop your prices a bit more, then the competitors run another promo this can cause what the writer refers to as a "race to the bottom." Neither business wins in this type of scenario which could potentially happen if your promotional pricing isn't used strategically.
When the time is right for you and your company, here are a few examples of promotional pricing to offer:
- Buy one, get one free
- Flash sales (think Black Friday)
- First-time customer discount
- Tiered spending discounts (like free shipping on orders over $50)
- Customer loyalty program
- Seasonal sales
Have you been considering marking down some of your products or services? If so, I hope this post gives you a better idea of what kind of promo you'd like to do and when to do it. What other special pricing tactics have you used for your business? We'd love to hear all about it. Take care everyone!
