In the last post we talked about an automotive detailer that dropped his prices significantly in order to fill in his schedule. Instead of slashing his prices, here are some other promotion strategies that might have been more profitable in the long run.
Promotions Should Be Temporary
1. Make the discount temporary. Promotions should always have a time limit on them, or a quantity limit, to manage your exposure. Make it a one week sale, or a one month offer. It’s much easier to extend a promotion than cut it short. Plus the time limit on the promotion creates scarcity or a sense of urgency. The customer knows they need to book this week to get the discount or it will go away.
The second benefit of this strategy is that if a customer who is paying full price hears about the promotion they will realize that this promotion was also available to them had known about it, and they won’t feel like they are getting ripped off. And they might just sign up for your email newsletter to receive offers in the future.
Discounts Should Be A Promotion – Not A Price Change
2. Make the price discount a promotion not a price change. If the customer buying the $60 detail knows the price is normally $135 they will feel like they are getting a screaming deal and won’t be shocked when the price goes back up to $135. But they still might not come back at $135.
Use The Smallest Discount Needed
3. Make the discount smaller. A 20% discount is normally enough to get customers to take action. At $99 you’re offering about a 25% discount, and still making almost twice what you make at $60. Which means you need fewer customers to make the same amount of revenue.
Make The Promotion A Package Offer
4. Offer a package deal. Offer a discount if you buy a package of 5 in advance. Quantity discounts are very common and easy to understand. The added benefit of this strategy is that you get more revenue today which improves your cash flow. Plus there is a chance some customers won’t use all of the details in the package, which increases your margins again. You need a time limit on the promotion to receive this last benefit.
Use Messaging That Makes The Discount Appear Larger
5. Use a pricing messaging strategy like “Buy one, get 50% off”. The customer sees “50% off” but the discount is really only 25%. And you have also sold two details instead of just one, so your total revenue is higher, just like the previous promotion. This is also a great promotion for boosting market share.
Dropping prices is a quick and easy way to get more customers for most businesses. But the short term gain in customers or sales often leads to a long term reduction in revenue and profit. And there are much better options available that aren’t that hard to implement.
If you need help coming up with a promotions strategy for your business, send us an email. We would be happy to help!
