We have just about survived the biggest shopping day… week… nay! month of the year: Black Friday. It came around all too quickly, and for the savvy shoppers; panic discounts & giveaways meant exposed businesses were ripe for the picking.
In the lull following Black Friday it’s a good time to reflect on the panic mode that ensues for both consumers and businesses as we look to buy, and sell, in the instant-gratification-consumer-society we live in today. And let’s not forget, this happens all year round not just on Black Friday.
Do you see your numbers drop slightly, then AHHHH! Panic! and immediately rush to slash all your prices, give things away and post loads on social media to satiate the fear of failure that ensues when you’ve not been strategic enough? Even without doing any calculations to consider your margins. We all do. Well, at least the first part.
So, I didn’t come here to remind you of your human tendency to fear failure or act as some sort of confirmation/qualification/validation for your good friend ‘imposter syndrome’s’ voice that’s told you this all along. In fact, we’re here to talk about how to build an effective pricing strategy that reduces the PANIC! Mode, and in turn, allows you to get the most out of discounts.
Firstly, let’s just have a quick think about positioning. You can only be ONE of the following:
- You are a Low Cost Provider (your competitive advantage is cost-based)
- You incorporate differentiating factors (your product/service/tech does something different, or is better quality)
- You hone in on a narrow market niche (needs and preferences led)
- Your strengths lie in process that cannot be imitated or matched by competitors.
Great! So, which ONE are you?
I would put money on most of you not being determine between the first two. Don’t fall into the ‘I have a quality product but for a low price’ trap. It’s not viable, and stems from the same problem that the Panic Discounters among us can relate all too well with.
If you have a quality product, you likely have higher costs than your lower quality rivals. If you have higher quality product (and thus higher costs) then try to compete on price, the only thing you are doing is competing with yourself on margin; and we haven’t even put a discount on it yet!
So, if you REALLY had to pick one, which ONE are you?
So, now we’ve got that out of the way, let’s consider a few things that should help determine how an effective discount pricing strategy can reduce cortisol levels, mitigate Panic Discounts and make for a much healthier margin! For the sake of this blog, we will mainly consider the price over quality juxtaposition.
Those who have ever slashed prices in a Panic Discount are likely to have picked a Promotional Discount as their poison. The short-term quick wins that drive sales fast and immediately calm you down as you see the numbers picking back up.
When used effectively, they can provide a much-needed boost in predicted drop off periods but make sure to consider the extra additional cost of operations and marketing the promotion in your margins before giving it the go ahead!
Timing of promotional discounts is paramount. If you have a promotional discount on all the time; it is no longer a discount, it is just a lower price with ‘NOW’ next to it. Customers will become accustomed to the lower prices and it leaves you next to no wiggle-room. It is MUCH harder to increase a price than reduce it. Note: I am aware of companies such as DFS whose entire business model revolves around this.
Cast your mind back a few paragraphs and remind yourself which camp you sat in ‘positioning’-wise. If you are competitive on price, promotional discounts are likely to be an integral part of your pricing strategy across the year.
If, however, you have a quality product or service (and probably higher costs) be very careful of the perception of your customers. Lower price is often associated with lower quality.
Consider Adding Value (to customers, the planet or charities)
We often jump to discounts as a means of increasing custom when numbers start to drop off. The assumption here is that we understand what the customer wants; something cheaper.
But, do we know that?
If you’ve done your research and that is the outcome, then fair enough, crack on! If you haven’t; have you considered where you might be able to add value to entice extra custom but with a lower cost to your business and a better buying experience for your customer?
Perhaps it’s a free coffee for a parent in a leisure centre or indoor adventure park. Perhaps it’s a bottle of prosecco for the parents who organised a child’s birthday party at your venue. Whatever it is, don’t just assume that all your customers want to do is drive down cost. If they can, they will pay for what they believe they are getting in return.
We like to think even bigger here at mama and consider the desires of your customers way outside the immediately obvious ones. With the rise of sustainable consumerism, and environmental considerations in the purchasing decision; consider how you could give back as part of your added value; maybe, a % profit to charity scheme; or a collaboration with a local charity; or a tree planting scheme; the possibilities are genuinely endless to do good. Customers like to feel like they are giving back as part of a purchase, so think about how this could be incorporated as added value, instead of discounts!
Reward Loyalty & Valued Custom
In arenas where you can benefit from repeat custom; whether you are competitive on price or on quality, consider how you can reward your customer’s loyalty. If you sit in the latter camp, this is where a discount might be appropriate. Instead of slashing prices for the masses, why not consider giving discounts off the back of certified custom.
Where Possible, Plan Ahead!
As marketeers, we are all too aware of the need for flexibility and adaptability in fast moving markets. However, it is safe to say that there are certain factors we can predict. Black Friday, for example, comes around every year. So, consider your pricing strategy way ahead to reduce the panic discounting and longer term strain caused by slashing prices.
So to all you panic discounters out there, start thinking about your 2020 pricing and discount strategy and watch your discount related stress reduce this year.