If you have a business, or have ever bought something, you’re probably well aware of what promotional pricing is. You’ve probably glanced at a thousand “SALE!” signs in shop windows or ignored hundreds of emails with “BOGO” or “50% OFF!” in the subject line from a brand you didn’t sign up for notifications from or maybe have never even heard of! Promotional pricing strategies are used all of the time and have found a permanent home amongst the retail industry’s many other tactics for boosting sales. Today we want to answer common questions about promotional pricing. When is the best time to run a promotion, how often should I do it, and will it even work? If your business is growing and you’re looking for more ways to keep up the momentum, or you’re just curious and ready to learn, keep reading for our tips on how to run a promotion.
Economic uncertainty, rising prices, and endless competition between similar brands and products have resulted in a retail environment that is ruthless, tedious, and frustrating for merchants and overwhelming for consumers. Data from Shopify suggests that over 70% of consumers would always go for the cheaper option when comparing brands. Promotional pricing can be a valuable strategy for your business if used properly, next we’ll talk about different strategies and provide some insight on how to implement them effectively.
Flash Sales
Flash sales are a simple promotional pricing strategy as it involves lowering the price of your products for a select period. These strategies are used to increase fear of missing out and create urgency for new and existing customers who may not be ready to make a purchase yet. These sales are effective in encouraging impulse purchases and can help your business to attract new customers, increase sales, encourage customer loyalty, and even help to clear out excess inventory. They can be effective if used sparingly, while some businesses’ entire brand strategy involves offering large discounts on certain products for a limited time. An effective flash sale must be appealing, relevant, and simple. The promotion should reach the right customers at the right time and shouldn’t require them to jump through too many hoops.
Seasonal Sale
You’re likely familiar with Black Friday and Cyber Monday, the dreaded holiday season shopping events that draw huge crowds and even bigger sales. These are examples of seasonal sales that retailers use to capture existing and potential customers during periods of particularly high traffic. This strategy can also be helpful for clothing brands that offer a seasonal selection of products to clear out the past season’s inventory or incentivize shoppers to refresh their wardrobe for the upcoming one.
BOGO
Buy One Get One (BOGO) is a common strategy brands will use to attract new customers and potentially lead to larger orders as well. This strategy is great for your existing customers who might have been looking for an excuse to make another purchase, this strategy is tricky though as it can be difficult to justify that much profit margin loss on your products. Consider a buy on get one 50% off promotion rather than buy one get one free if you’re concerned about losing profit.
Loyalty Programs/Rewards
Loyalty and rewards programs are specifically meant to target existing customers. There are many different examples of loyalty programs such as Starbucks rewards point system, Sephora’s beauty insider rewards program, and even paid loyalty programs like Amazon prime. Loyalty programs have become more popular as they provide unique benefits based on how often your customers shop with you and how much they spend. These programs can be totally automated and on-going, so you never have to worry about the negative impacts of running promotions that we will discuss in greater detail next.
Now that we’ve discussed the different types of promotional strategies, let’s get into some of the dos and don’ts. While promotional pricing can create urgency and attract new customers, it may hurt your image if you run promotions too often. Your products may appear cheap or low-quality if they’re always on sale, and you wouldn’t want to diminish your profit margins by selling your products for less than they’re worth. Promotional pricing strategies can be highly effective at increasing eCommerce sales during times of high-traffic as well as during slower periods but it is important to consider which strategy you will use carefully as each tactic is meant to drive sales based on a variety of factors including traffic, demand, inventory, and the type of product you sell. You must also ensure that your eCommerce platform can handle complex promotions as well. While an exciting sale may result in lots of new traffic and conversions, it’s important to not put all of your eggs in one basket. Promotional pricing can only truly help your business grow if paired with pricing and marketing strategies that are meant to encourage repeat business as well such as retargeting or personalized advertising. Lastly, and most importantly, make sure you always monitor the results of your promotion. This will help you to determine which strategies suit your business best and will help you prepare better for your next promotion. The following is a list of key performance indicators (KPIs) that you can use to measure the success of your next promotion.
Return on Investment
Return on Investment (ROI) is a financial metric you are likely to already use in other aspects of your business analytics. We advise calculating the ROI of your promotional pricing campaigns to determine if you’ve earned enough to justify running it again in the future.
Customer Acquisition Cost
Customer Acquisition Cost (CAC) refers to how much money your business spent to acquire a new customer. Promotional pricing campaigns are used to attract new customers, so this metric will help you to understand if your pricing strategy is effective.
Click-Through Rate
Click-Through Rate (CTR) is a metric used to measure how often potential customers click on a promotional pricing advertisement, link, pop-up, or call-to-action compared to how many times it’s shown. You can find this metric by dividing the number of clicks by the number of impressions, then multiply by 100.
Sales Lift
Sales lift compares the sales you receive from your promotion to your baseline sales. This is the most important metric as it will give you a clear picture of whether or not your promotion was successful at increasing eCommerce sales.
We hope that you found this article helpful. Virid is always on and always ready to explore new ways to get involved in our industry and become innovators in the eCommerce space. If your website is struggling and you’re feeling frustrated by your current platform’s support, or lack thereof, Virid can help. We offer all-in-one solutions to all your current challenges as well as the challenges that may find you in the future. Our eCommerce consulting services and support are all-inclusive and can be tailored to whatever your business needs -and nothing that it doesn’t. If you’re looking to increase eCommerce sales and looking for a new eCommerce platform, contact Virid today.
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