Retail business and discounting go hand-in-hand. You will hardly find any retail business that is not working on discounts at any given time. In almost all the cases, discounting is an important part of marketing activities for any retailer- small and big.
Now the question is- “Is discounting a wrong or right thing?” And if it is right then how smart retailers make it work to grow their business?
Yes, there are smarter ways that discounting can be done!
You should always have a right strategy to go ahead with it or you will end up becoming a discount shop where people are always looking for discounts. These kinds of shoppers never make retailers good margins. On the other hand, the brand equity of the retail business goes down over time. One example that comes to my mind is a well known departmental chain in the US. Few years ago, they stopped discounting as the brand value was eroding fast.
Discounting can work for you!
Before you even think about it, make your objectives clear as to why you want to come up with discounting. Following are the 4-big reasons why discounting works. If it goes wrong, it can directly impact your profit margins.
1. To attract new customers- It is a part of heavy discounting wherein you just want to grab the eyeballs of people and convince them to step into your store. This is also true while opening a new shop in an area where the retailer has no or little presence. Clearing Sale is the best time to go for heavy discounting when you are not looking for high profit margins but to make up the break-even cost. In this case, your profit comes when some of these new customers become repeat ones.
2. To engage existing customers- Yes, nobody wants to let go their loyal customer base! So, you have to find a way to keep them engaged. You just cannot go with seasonal sales just like other retailers. Or you will lose the unique opportunity to pamper your loyal customers. For example- You can surely learn it from smart businesses focusing only on Instagram to grow. A very good example is Daniel Wellington.
It is a watch brand which has grown into a global unisex watch brand only on Instagram. It perfectly knows how to pamper its customer base. Girls who have purchased Daniel Wellington, the company pampers them with free straps in different colors to complement the existing watches.
Who wouldn’t love when you get something for free to accessorize your look?
Not only they become more loyal to Daniel Wellington, but end up becoming brand ambassadors too, promoting Daniel Wellington for free.
This is how engagement marketing works for referrals.
Hundreds of fashion retail stores have started pampering their customer base for referrals rather than spending thousands of dollars on advertising. It is part of what we know as viral marketing. Don’t you think that it is the coolest way to add discounting to your marketing activities?
3. Promote new items- What if you can promote new items added to your store lately? When something is new, you have to win the trust to make it one of the highest selling items in your store. You do it when you give an offer on it to new and existing customers. If it has quality, it will definitely fulfill other needs that I mentioned earlier in point 1 and 2.
You want to learn how it works?
Just head over to Instagram and search for #Nutella. It is very popular in North America among health conscious young generation. But for emerging markets such as India, it is a new product. So they had to come up with a unique strategy. What they did is — they started sending it as free gifts to Instagram girls.
Result is Nutella has smartly captured the attention of urban, aspiring India who wants to stay fit and eat healthy all the time.
No, I am not suggesting that Retailers have to focus on Instagram only. You can choose any platform right from Facebook to Twitter to Pinterest to make discounting work for your retail business. You just make sure that you are adding value to your customer’s lifestyle.
4. Cross-sell and up-sell- You will find it in almost in every mall. They do it right after new arrivals in their stores. They offer discounts on items which have lower price tag so when people come to look for them; they end up buying things from new arrivals which have no discount. This is how cross-selling or up-selling work.
Personalized discounting or offers is what brings remarkable results-
I am sure you might be thinking that most of the above mentioned things you already knew and yet almost all retailers work on those points. But they still fail!
Do you know why? Because, they don’t work on personalization. Yes, I am talking about personalized discounts to match unique taste of every buyer. I have always believed that one offer does not fit all. Did you notice that Denial Wellington and Nutella are very active on Instagram?
The reason, they know that their target crowd hangs out on Instagram. Target crowd is people who have disposable money to try out new things. And if they like they keep on buying it. This is how personalization works.
What if you can get to know the purchasing behavior of each of your customers? Wouldn’t you love to give more discounts to people whose per transaction value is much higher as compared to others? Wouldn’t you love to give discounts things they love to consume on a regular basis?
If you do, then your customers are never going to leave you because you have learnt the way to pamper them when they need it the most.
If you integrate your promotional marketing with our loyalty system, you can do it smarlty. Our loyalty system tracks every transaction your customers make and where and how frequently they do it. This information gets accumulated overtime which you can see right in your dashboard.
You get to know things like- Who your active customers are and how much they spend on a monthly basis. What kind of products they use to buy and how frequently. This is what you need to make discounting and offers more personalized. It also helps you to invest your marketing budget on right customers who are more likely to purchase.
So retailers, I will definitely say that you should be discounting to increase sales!