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Discounting pricing strategies

Discounting is a popular pricing strategy and when used appropriately can help drive business growth.

Discount pricing can help to maximise sales and profit by encouraging new sales from inactive customers, attracting new customers and encouraging undecided customers to purchase (i.e. limited time offers).

Before discounting your products or services, it is a good idea to review your current profit margin, markup and breakeven point and determine whether discounting will help or hinder your business.

Business owners should also consider their current market environment, such as competitor offers and pricing and the reasons why they may be experiencing a drop in sales. Furthermore, discounting may not be suitable for businesses that use premium pricing as customers may perceive discounted prices as low quality.

However, discounting can be beneficial for many businesses, especially those looking to clear last season’s stock, out-dated models or boost a slump in mid-week or off-peak season sales.

Here are three ways to use discounting to help drive sales:
Seasonal discounts
Seasonal discounts work off the basis of demand, as a business may experience less demand during certain times of the year, month, week or day. Some businesses are more subject to the seasonal fluctuations than others – i.e. ice-cream stores in Winter and can benefit from offering discounts during slow periods. Examples of seasonal discounting include lunch specials at a restaurant or a ski shop offering sales of last season’s stock over summer.

Bundling
Bundling involves selling several products or services as one combined unit. This type of pricing usually saves the customer money and works well when the customer can see the benefit of the complementary products or services. An example is a hair salon bundling both shampoo and hair conditioner.

Value added offers
These types of offers provide customers with an add-on or feature as part of the product or service. For example, a luxury car brand which offers an ongoing maintenance program. Value added offers increase a customer’s perceived value of a business or brand and help to distinguish your business from your competition.


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