Business advice
Business advice // Hayley Simmons Promotions and discounts
Whether you think they’re a savvy sales strategy or a dodgy deal, marketing consultant Hayley Simmons looks at the potential benefits of running promotions and discounts in showrooms
H
ave you ever wondered why many big retailers structure their advertising campaigns around almost continual offers?
Many of us – from the perspective of both
consumers and retailers - question if these discounts are even genuine, so what makes them such an enticing tool? Even with the scepticism, the evidence shows that when it comes to influencing buyer behaviour, they really do work.
Why run a promotion? Firstly, we should consider the purpose of running
a special offer before we look at its effectiveness. Is the objective to draw in new customers, improve the conversion rate, or reduce stock levels? As shoppers, we are always looking to justify a
purchase to ourselves with reasons to part with our money that outweigh any objections we may have. A ‘sale’ or promotion can nudge customers further along the buying journey, creating the urgency to act now and therefore being effective in driving new enquiries. Big sales are inherent in this industry. Large
advertising budgets are carefully weighted around traditional shopping periods when customers are more inclined to shop (post- Christmas, Black Friday, Bank Holidays, etc.), and we have become accustomed to this messaging.
Customer perception There has been a lot of media coverage on
the legitimacy of promotions, with scepticism continuing to grow. I asked Cheshire-based KBB
retailer Stuart Warrington thoughts: “I am a little because,
in reality, for his bit cynical I don’t believe that
promotions, discounts, or giveaways truly exist a lot of the time; they are merely one marketing tool alongside others. However, from a marketing perspective, they obviously work; otherwise, the large retailers wouldn’t bother doing them.” From the retailers’ perspective, Warrington adds: “I also think that some retailers, rightly or wrongly, may hold some snobbery about offering discounts. They think it devalues what they do.” I understand this perspective, and there are
many possible reasons behind it: the concern that it appears desperate or dishonest, that past customers will be disgruntled at paying full price, or that no one will pay full price again. For some businesses that can clearly demonstrate price competitiveness, never discounting and having an ‘everyday low price’ approach may be a key point of difference. Retailers targeting the luxury end of the market
need to be careful here and consider what’s ‘on brand’ when it comes to these tactics. However,
affluent customers are not immune to the thrill of a deal either.
The bottom line Big retailers plan promotions months in
advance, with tight control over margins. This means that room for promotions is ‘baked in’
to the list price already. Many independents will routinely add some
discount to their quotes, and these promotions are simply a different way to present that discount value upfront in the form of a special offer. Alternatively, these discounts can be held back and only used for customers that haven’t converted at the full price. In this instance, it may make sense to sacrifice some margin to close a deal that has already had time invested in it if it means you can spend more time and less money attracting new customers. It’s a tricky topic for many retailers, but one of the big advantages independents have is the choice to go down this road or not. A no-nonsense approach to pricing, where the best price is offered first time with no smoke and mirrors, is an admirable stance that some customers will really value. That’s not to say that using a promotional message as the ‘hook’ to stand out in this competitive market is an unscrupulous approach. So, when considering whether to adopt
promotional tactics as part of your marketing plan, it’s important to think long-term, being clear about your objectives, how much you can afford to give away, and at which stage it is most effective.
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62
kbbreview
September 2024
iStock.com/Hanna Siamashka
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