How trade businesses can keep the profits in their pockets
It is well within any business’ interest to run promotional offers from time to time as a way of bringing in new customers and rewarding loyal clientele.
However, there is some hesitation amongst enterprise owners and operators to use such strategies to drum up business interest.
This mistrust appears to come from a fear of reputational and financial pitfalls as a result of product and service mark downs. However this supposed ‘doom and gloom’ is completely avoidable as long as business owners are intelligent and strategic when running promotions.
In the blue-collar industry, the common misstep that many business owners make is discounting too frequently or too steeply.
Discounting too often can lead clients to think that the product or service isn’t worth the full amount, and leave loyal customers feeling undervalued if they pay full price for an item that is later discounted by 50% the following week. Frequent deductions also train customers to wait to make purchases until the next period of sales.
While it’s helpful in the short term to move unwanted inventory and entice new clients, ultimately this strategy of constant and steep discounts is not a viable long-term one for the business.
However, as mentioned earlier, discounts or promotional runs here and there will not go unappreciated by the client-base and can be useful in moving unwanted stock and increasing the returns.
The key is to find the balance between thanking customers for their service and maintaining revenue.
Such harmony can be found in the when and where you implement discounts and service. Below is a list of possible promotional tactics trade businesses could employ:
- Reward customers for upfront payment: Offering clients a discount for paying their bill upfront is a great way to encourage speedy payment of invoices. The customer is gifted a meaningful, financial advantage if they pay early which in turns means cash flow is improved. This strategy helps to solve one of the most common problems in the blue-collar industry - delayed or late payments.
- Clean-up excess inventory: It can be more advantageous for those businesses with perishable and seasonal products to sell off excess stock for a lower price as it will minimise any long-term handling or storage fees. For those employing this tactic though, it’s important to be conscious of the customers that have made these same purchases at full price.
- Encourage volume in customer orders: It can be advantageous to reward customers who are purchasing large quantities or extra parts as this encourages them to continue to do so. Trying cumulative discounts, such as discounts for customers who place multiple small orders or for valued customers.
- Make discounts time-sensitive: By offering discounts for a limited period, stock can be moved quickly and increase sales without worrying about having to permanently reduce prices. Discounts like this best suit the end of certain periods such as the end of the financial year, or end of quarter.
- Keep the competition on their toes: This strategy is perhaps the riskiest of them all, in this scenario it is important to remember to not set a service or product prices too low. However, if a nearby competitor is using cheaper discounts to capture market share it is wide to consider certain discounts to maintain a customer-base. However, as advised earlier, never make this a permanent strategy due to the risks it poses against the value of the business.
Promotions and discounts are a great way to move inventory, entice new customers and increase returns, however always consider product positioning before choosing a discount pricing strategy.
When prices are taken too low, it can be difficult to build them back up to the genuine and true value they once were, however when done intelligently and thoughtfully, discounts can be a great way to thank loyal clientele, bring in new customers and generate significant revenue.
If your client is considering discount strategies, make sure they consider all aspects of their company, product or service to be marked down and customer base at the time. Choose the best strategy to suit their business and, most importantly, never make it a long-term solution.