February 13, 2018
Discounts are one of the marketing strategies used by businesses to make sales and generate conversions.
You can’t just wake-up one morning and decide to create discounts on one of your products just to get rid if it.
You have a 90% rate of hurting your business and your profit margins. Discounts used strategically can drive sales. One of the best times to use discounts is seasonally. Low peak seasons and high peak seasons.
Advantages and disadvantages of seasonal discounts
Businesses ought to study their customers behavior and sales pattern towards pricing, to be able to determine the best strategy to use for their target audience.
Some of the disadvantages of using seasonal discounts are:
- Trains the customer to wait: Periodically offering a certain discount at a particular time of the year can make most customers buy from you only during that period. This could have a negative effect on your usual profit margins especially few weeks before the sales periods.
- Will not increase overall profit: Discounts that are not offered strategically will definitely affect the profit margins of a business. This could lead to not profiting at all and finally closing down business for unprofitability.
- Devalues your brand: customers who buy items from you at a discount can tag your product of being of low-quality. Compared to those who bought it at a full-price, they will
see it as cheap especially if the product doesn’t last to the duration they expect of it.
On the other hand the advantages of discounts are as follow:
- Customers feel cared for: Hold on! Giving out the right discount to the right person and at the right time always adds some value to your brand. A gift, a coupon, a percentage off, free shipping are types of deals you can offer. Read more on ways to choose the right discount(insert link).
- Stay ahead of your competitors: if your customers have a good impression and are satisfied about your discount system, they will stick to you. They will rarely compare your product with another brand.
- Take advantage of seasons: according to Convince and Convert “seasonal deals, sales, and discounts make sense in the buyer’s mind. Associating a discounted rate with a particular season is a wise move and won’t likely come with negative implications.”
Statistics on discount seasons
These are some helpful stats that will help you know the importance of discounts during different seasons and the factors that trigger customer reactions towards discounts.
Existing seasons and businesses that thrive during discount seasons
Festive seasons or annual events vary in every country, based on the culture and social environment of the country. Some of the annuals events that cut across are:
Everything sells during this period. This a period where people spend a lot. People are trying to achieve goals, move to new houses, get married, set up their businesses, offer gifts to family and friends. Therefore customers like to take advantage of discounts to be able to buy a large quantity of things.
During this period, products from cloth, food stuffs, drinks, electronic gadgets, house furnitures and more move around a lot.
Christmas season is also a season for merrymaking, products are bought mostly for children. Toys, christmas trees, decoration materials, clothes and accessories, and greeting cards are some of the products that get alot of demand.
The main reason for Black Friday is discount! All over the world the most sales are made during this period of the year. Electronics, gadgets, clothes and accessories and anything sold online. That has been discounted, has a high probability of being purchased. Most customers always cease the opportunity to buy products they see as expensive on days like black Friday or cyber Monday.
It’s the lovers day, so they say. It is celebrated worldwide, and people don’t hesitate to spend their money and time on it. Because it is all about love. During that period, customers look for products that can be offered as a gift. Some of valentine’s bestsellers are accessories, jewelries, travel, electronics, clothing, lingerie, gift vouchers, books, music, dinner, or any product or service that could be of interest to couples to make that day special, it is an opportunity to cease.
Food is the product that tops the list of this season, online businesses that deal in product like food, gift accessories, clothing, travel and tours have great upsell chances if discounts are used right.
Climate change/ Cultural days
Based on the country in which you reside in the world, they all have 4 different seasons winter / harmattan, spring, summer and autumn/ rainy. Before the winter season starts, stores that deal in clothing, offer deals on winter clothes during fall to encourage people to buy ahead of time, this allows them to clear the stock for new arrivals .
Same as summer, the fashion industry gains a lot from this season, trending outfits and accessories to stay fly during summer are good deals to offer customers. Offering them on discount during winter is a way to create anticipation and get customers to prepare for the climate change.
Annual religious holidays such as Thanksgiving day, Diwali, Hanukkah, and Eid al-Fitr are also seasons whereby discounts can be tailored to your customers depending of their status on your online store. During this seasons, food, drinks, clothing are products that go around a lot.
Strategic ways to implement discounts in your business
Below are a few ways you can convince customers to shop from you with discount tricks, all in the quest of increasing your profit margins and growing your business.
Here are 10 tips from Webintrepret to increase your sales with discounts during this seasons:
- Target and segment your audience according to gender, age, relationship and status, to be able to channel your discount to the right persons, that is the first step to take.
- Make your online store mobile-ready. It should load fast and have a smooth checkout process.
- Use apps to notify your (potential) buyers of special offers, discounts and early birds.
- Guarantee timely shipping.
- Offer free gift wrapping, free shipping, or bundled discounts.
- Start your AdWords campaigns in advance.
- Remarket: target a particular website’s visitors with specific, relevant ads.
- Send an email campaign to your customers.
- Consider partnering with a company that offers complimentary services, for example spa services and flowers. This way you can advertise an offer 2 for 1.
- Run a contest to help increase your brand’s visibility.
How to ensure profitability when you want to apply a discount
You need to make sure the seasonal discounts you offer are making you gain more income rather than losing some. Therefore some mathematics will come in handy.
There are 3 types of profit margins: gross, net and operating.
- Gross profit: is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.
- Gross profit margin: is the proportion of money left over from revenues after accounting for the cost of goods sold
- Net profit margin: is the percentage of revenue left after all expenses have been deducted from sales.When all other operating expenses like tax, cost of good are subtracted from revenue. Then, simply divide net profit by revenue, and to convert that number into a percent, multiply it by 100
- Operating profit margin: it is measuring the proportion of a business revenue leftover after paying for cost of productions, wages, materials etc. It is calculated by dividing a company’s operating profit by net sales (net sales refers to total value of sales minus the value of returned goods, allowances for damaged and missing goods, and discount sales)
Gross profit margin = (gross profit / sales revenue) x 100
Net profit margin = (Net Income / Total sales) x 100
Operating profit margin= (operating profit / Revenue) x 100
These are a few resources that can help you get through your calculations. The aim of this section is to help you calculate your profit margins so as to know the percentage of discount you can put on a product whenever you need to discount a product so as not to collapse your business.
- How to measure your business profitability
- How to calculate profit margin
- An easy profit margin calculator
Bear in mind not to invest much in marketing. Just make use of your subscribers list, both from your newsletter list and social media followers, and prompt them to share the word for you. If not it may cut into your margins. Meanwhile the Woocommerce All discounts plugin has various types of discount rules flexible enough to help you get through easily.
Clearly identify those who really need your discounts and target your offers towards them. Like first time shoppers and hesitant customers. You can get to know such people if you are able to track cart abandonment on your online shop, or detect first time shoppers with tools like:
- Google Analytics helps you track, analyze and report customers behavior on your online shop.
- Abandoned Cart Lite for Woocommerce which is an extension that helps you track and bring back customers that leave your online store without buying.
Offering bundled products is a great discount strategy to match moving products to stagnant products during seasonal events to help get rid of unsold stocks.
Seasonal discounts are a great way to fill up the gaps. Using them strategically is even better when used rightly to increase sales. There are many more occasions all-year round you can use to your advantage. Whenever you think you need to convert visitors in customers. It is up to you to keep your eyes wide open to see those opportunities.
Do you think we missed out an important season? Tell us in the comment box below!