If cash flow is a problem for your small business, discounting your products and services can seem like a bad idea. But with the holiday shopping season right around the corner, how do you ensure your business stands out from the crowd when today’s shoppers increasingly expect holiday sales and promotions?

The temptation to offer discounts shouldn’t be taken lightly for a number of reasons:

  1. Sales may spike, but it’s not sustainable in the long run

    Bargain hunters are the most strategic customers you’ll encounter. They surf the internet for deals, compare prices, clip coupons, and rarely pay full price. While this shopper may provide an initial spike in sales, once the expectation is set, it’s hard to keep them coming back without discounting more.

  2. Discounting will devalue your brand

    Consumers perceive discounted prices as the true measure of what they should be paying for your products or services.

Discounting isn’t the only problem for cash-strapped businesses, as other forms of promotions can also be detrimental. Free trials, 30-day guarantees, and money-back guarantees can all serve to create a climate that could continue to disrupt cash flow. Who’s to say the customer won’t change their mind, want their money back, or turn away from you at the end of the free trial?

That said, discounts and promotions can be a great way to bring new customers through the door if thought is put behind them.

So what are your options? As with all successful marketing, don’t apply a one-size-fits-all approach. Avoid blanket promotions at all costs. Here are four ways to do just that:

  1. Focus on Building Loyalty

Repeat customers may only represent 20% of your customer base, but they make up more than 50% of your sales. If you have cash flow problems, building loyalty should be your number-one sales and marketing strategy. Just look at the data (thanks to SweetToothRewards.com for compiling it):

  • After one purchase, a customer has a 27% chance of returning to your store. If they come back and make a second or third purchase, they have a 54% chance of making another.
  • Repeat customers have a 60–70% chance of converting, making them much easier to sell to.
  • Repeat customers spend more on each purchase and more at key times (i.e. the holiday season).
  • Repeat customers spread the word.

A thoughtful promotional strategy is one that caters to these loyal customers, but also brings in new ones.
One simple way to build loyalty and drive sales as part of any sales campaign is to launch a loyalty program. Offer shoppers an incentive to sign up for your emails (be sure to give them a good reason to do so, such as being the first to know about what’s new and future deals), then develop a personalized email campaign that keeps these shoppers engaged throughout the year.
For more tips read: 8 Secrets to Creating Customer Loyalty and Increase Revenue by Putting the Customer First.

  1. Don’t Lower your Price—Add Value

Instead of focusing on price, add value. One way to do this is to bundle another product, service, or asset that adds value to a full price sale at no extra cost. For example, a free e-book or product sample. Not only will you sell more at full price, you’re incentivizing the customer to act before the promotion ends.
Another way to emphasize value is to focus on how your small business is unique. Is there a buying or post-purchase experience that you offer that your competitors don’t? Do you offer a price or service advantage (without getting into discounting)? Remind existing and potential shoppers.

  1. Experiment, Test, Measure

In order for you to find the right promotional strategy for your business without further eroding cash flow, it’s important to experiment, test, and measure results,

  • Test product bundles or potential value-add options using your e-commerce platform
  • A/B test your email campaigns to gauge which promotions are the most compelling and resulted in the most responses from your target market.
  • Use unique online landing pages so you can track hits to those pages.
  1. Calculate Risk Against Reward

Use the data collected in your testing phase or even from previous campaigns to calculate risk versus reward. For online campaigns, track email open rates, click-through rates, and so on. How is your target audience responding? What’s the impact on revenue?

The Bottom Line

Don’t dive into a promotional or discounting strategy just because it’s the season, other customers are doing it, or you need a quick cash fix. Instead, find ways to showcase your unique value proposition and encourage behaviors that drive loyalty, repeat business, and longer-term sales.


Author: Caron Beesley

Published: August 26, 2016

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