One of the most difficult decisions that needs to be made in business is setting your pricing. Choosing a price for a product or service can make or break a business – set your prices too high and you could alienate most of your potential market, set it too low and you could devalue what you’re offering and reduce your profit margin.
There are many factors to take into account when considering how much you’re going to charge. The initial and ongoing costs, your competitors and their pricing and the kind of customers you would like. It’s worth spending time heavily researching all these factors before reaching a decision.
It’s also worth remembering that the pricing structure doesn’t have to remain the same. Discounts, special offers and promotions can all be used to increase sales at various points.
When to offer a discount
Discounts are not always the answer because you don’t want to devalue your brand or make customers think twice about paying full price in the future. You should think hard about what you are hoping to achieve with discounts and how they fit into your overall promotional strategy.
However, discounts do have their place and here are some times they may work particularly well.
- Move old stock: If you over-ordered a product that is perishable or doesn’t have retail longevity, a discount can help you shift it fast. Recouping some money is better than none.
- Seasonal products: A discount on seasonal products either side of the main sales rush can bring in extra money and help you clear stock.
- Launching a new product: Pique people’s interest and get them talking with an introductory offer.
- Senior citizens and students: These special group discounts will help you compete with larger retailers, as well as win you good favour and hopefully new clients as these customers tell their friends.
- Encourage prompt payment: Offering a discount for payment by a specific date can boost your cashflow.
- Point-of-sale: If your customer is hovering on the edge of making a purchase, a ‘buy it now’ discount can seal the deal.
- Good customer service: If there has been a delay with delivery, for example, or some other type of small hitch, a discount can smooth things over and help you retain the customer and their good will.
- Reward existing customers and show them that you appreciate their business. You might offer discounts for Facebook fans or Twitter followers or money off when a customer has bought a certain number of products from you.
How to offer a discount
There are plenty of different discount options too. Small businesses are notoriously creative so there are lots of tests and experiments you can do to see what works best. We’d love to hear what works for you.
You could consider:
- Percentage off: E.g. 10% off your first purchase, 25% off with this voucher etc.
- BOGOF: Made popular by the supermarkets, Buy One Get One Free is not only a way to encourage sales, but also a way to encourage multiple sales.
- Buy 4 get the 5th half price: Common in coffee shops, you can stamp a customer’s card, or similar, and offer a discount after a certain number of purchases
- Free shipping or P&P: If you sell your products through a website or mail order, offering free shipping, postage or P&P is a good way to encourage sales and bulk ordering.
- Have a sale: You can discount items on an individual basis or have a percentage off everything sale. This could help you shift old stock or clear your stall at the end of a craft fair or pop-up event, for example.
- Ad hoc discounts: Don’t forget, you can apply discounts for individual customers, rather than across the board!