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How To Use Special Offers In Your Small Business Marketing

Do you provide special offers to people, as a way to encourage them to buy from you?  Personally having spent a decade in promotional agencies I’m a great fan of promotions. If executed correctly promotions can be incredibly effective, but if done badly they can lose you turnover and profit.

The main objective of promotions is to generate increased sales and increased profits. So if you are reducing your margin, the additional volume has got to be significant enough to compensate for the reduced margin.

Sometimes promotions can be run to clear stock  and you accept the reduced margin as the price you pay to move unsold merchandise.

Special offers: Training the marketplace to wait

The first challenge with using special offers, is that if your customers know that you will run a promotion at a specific time of year you may just be training the marketplace to wait and buy at the reduced cost.

The proof of this is evident every year at Christmas.

If sales are slow in October and November, retailers start to get nervous and start price cutting. Immediately after Christmas the sales always begin. As a result more and more people are leaving their Christmas shopping until the sales start .

The result is that the retailers miss out on the full margin sales and have to accept the reduced  margin.

Special offers: The big brand approach

Major retailers, especially the grocers use promotions extensively and generate huge amounts of incremental turnover and profit.

Promotions are also used as a key part of their overall pricing and value strategy.

Their approach is based on promoting at slow times of year when demand is low. In this way they generate incremental sales.

The second element of their strategy is that the majority of the discounts or the extra product is paid for by the suppliers. Huge additional volume is generated and the retailer still receives full margin.

Special offers: The all year round “sale now on”

We have all seen companies, who always seem to have some kind of sale on.

This marketing strategy is actually quite different from the use of special offers.  The use of back-to-back “sale now on” messages, is typically used as a way to position a brand as a budget / value provider.

Unfortunately you can also see examples of  this in the SME sector. If you look through the Yellow Pages you will see some ads offering a 10% discount. This is bad marketing as they are either working on a massively reduced margin all year or they are going out at full price and the ad is deliberately misleading.

What level of discount should you offer?

We have all become used to deep cut promotions. Again the supermarkets have led in this field. Nowadays 50% off or buy one get one free have become the norm.

You need to do the maths on your offers very carefully as for many businesses a 10% discount is unlikely to attract new customers into the brand but will equate to something like a 30% reduction on the margin. If you are simply subsidising existing customers, your promotion will lose you money.

Special offers: Make your offers work

Here are some tips to help you make money from your special offers::

  • Add value – added value promotions such as 50% extra free will generate increased profitability if the additional volume more than compensates for the reduction in margin.
  • Scarcity  is a great way to generate sales. 25% off the first 100 sold is a proven way to make customers take action.
  • Limited time – you need to put a closing date on your special offers to force people to take action. Without a closing date there is no time imperative to buy.
  • Timed – special offers outside of the peak sales period will generate you additional sales in an otherwise quiet period.
  • Timing – avoid running a promotion at the same time every year otherwise customers will become wise to it and defer their purchases until  the promotional period.

Business Development Advisors can help you grow  your business and take it on to the next level. If you’d like to find out more please get in touch.