How to Offer Retail Discounts Without Slashing Your Profits

 In Restaurant Tips & Trends, Retail, Retail Tips & Trends

Discount promotions are one of the most common approaches for increasing retail sales. But just because discount promotions are popular doesn’t mean they’re always effective. Lowering your prices might bring in customers, but if you don’t execute your sale properly, you could cut into your profits and even damage your brand and your reputation.

It’s important to weigh all the pros and cons of running a sale or discount and to define your goals and actions. Here are some tips to help get you on your way.


Here are a few common motivations behind offering a discount:


  • Acquire New Customers

A lower price can make customers (who have never tried your product before) decide to take a chance on you. If they like what you’re selling, they’ll probably come back again, even once your sale is over.


  • Increase Sales

Your goal is pretty simple: sell as much product as possible. This can be done in various ways, including product bundles, conditional promotions, or rewards for loyalty program members.


  • Re-engage Past Customers

Using a discount to encourage brand loyalty in customers can be done through promotions like loyalty programs. This not only makes your loyal customers feel exclusive, but it also encourages new customers to become members and join your loyalty program. You can also offer personalized deals based on your customers’ past purchases.


  • Get Rid of Outdated Products

Sometimes you need to get rid of the old to make room for the new, and discounting products can help with that. For example, if you’re a clothing boutique, you would want to clear out your summer goods as the fall months near closer. The same can be said for clearing out holiday items after the first of the year.


  • Bundled Discounts

Lower the price of a group of items bought together as opposed to lowering the price on just one product or service. These discounts can help you increase your average transaction size because you’ll be selling several items within a single order. With each online sale in this scenario, more items are sold, more revenue is made per order, and costs per order are decreased.

This is also a chance to pair items that aren’t strong sellers with products that have proven themselves as bestsellers. Make sure you measure the sales of the less popular items to see if they increase after the discount, and consider bundling items that customers are already buying together or that can help solve a problem in a similar way.


  • Buy One, Get One Free

Sometimes a discount isn’t enough to attract more interest. Buy one get one free is great for attracting impulse buys, moving inventory, and acquiring new customers, but you can also offer a “free” gift with a full-price purchase. Try offering a popular high-margin product with a freebie that’s less expensive but hasn’t sold well, or even offer free shipping.


How to Stay Profitable

It’s important to calculate whether your discount will still allow you to be profitable. Watching your margins is an important aspect towards staying profitable. There are two ways you can make sure this happens:

In order to keep your margins healthy, it’s important to keep your marketing costs low. You need to promote your discount, but not at the literal expense of your profits.

Start by marketing your discount to consumers that you’re already in contact with, such as existing customers, email subscribers, and social media followers. When spending to attract new customers, compute your projected profits from the discount and account for these marketing expenses.

Another way to watch your margins is to segment shoppers and tailor offers accordingly. For example, offer the discount to first-time customers rather than customers that have a history of being repeat buyers, or vice versa. This increases the chances that you lure in new sales without losing out on the margins of sales that would have happened anyway.

With the latter group, you can use your point-of-sale system to get a history of what shoppers previously bought, then create tailored discounts based on what that customer has purchased in the past. Both tactics can greatly increase conversions.

Discounting can be a great way to bring in new customers, reward loyal customers, and move a lot of inventory in a short amount of time. You just have to have a strategic approach and know your goals in order to increase your sales and revenue.

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