How to Use Discounts to Increase Sales and Customer Loyalty
A discount is a price reduction that allows businesses to lure in new customers, increase loyalty among existing ones and boost overall sales. While discounts can be a powerful marketing strategy, they should always be used in moderation and with the right customer and business goals in mind.
Discounts can be a useful tool for increasing market share in crowded markets, as they can provide a price that is notably lower than the competition’s, thus drawing in customers who are just looking for a deal. This strategy can be particularly effective for businesses that are launching new products or services to the market, as it can give them an immediate and sustainable revenue lift.
Rewarding loyal customers is another reason that companies often offer discount deals, as it is a great way to demonstrate their appreciation for the business and encourage customers to keep coming back. This is why many companies implement loyalty programs based on points or spend thresholds, for example.
Discount pricing strategies like flash or seasonal sales are also designed to pique consumer interest and generate new business within short windows, so they can be an effective way of drumming up instant demand.
However, it is important to note that discounts can also be damaging if they are offered too often, as they can lead to price fatigue and cause shoppers to wait for the next deal rather than acting now. This can also erode brand loyalty as consumers start to expect and even anticipate deals and promotions.
Offering volume discounts is a good way to encourage customers to purchase products in bulk. This can be an effective strategy for clearing out slow-moving inventory, which is common in retail and wholesale.
Another common use for discounts is to help a company reach a specific marketing goal, such as increasing social media engagement or attracting attention to a special event. In this case, discounts are typically limited to products that are part of the campaign or event and can be a great way to create buzz around an event and attract attention online.
When deciding whether to offer discounts, it is crucial to consider the company’s marketing objectives and its target audience. Companies should be sure to balance the benefits of discounts with their effect on brand image and profitability. It is also important to evaluate the impact of competitors that may be using similar tactics, as they might be getting more top-line revenue from discounts but could have much poorer profitability than the company with a more disciplined approach to discounts.