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5 tips for implementing promotional pricing strategies

Timo Sprinkhuizen
20 augustus 2024
Learn how to effectively implement promotional pricing strategies to boost sales and profit margins. Explore our top 5 tips for successful discounting.
5 tips for implementing promotional pricing strategies
10:03


Discount: a term that every retailer or brand all over the world is more than familiar with.

In recent years, sellers and marketers have made enormous efforts to boost sales within a growingly competitive and demanding business environment.

Within this context, product discounts have emerged as a widely adopted strategy to promote products. However, price promotions and discounts are intricate processes that don't always translate into higher sales.

In this article, we aim to highlight some essential points to help you grasp the value of price promotions and develop an effective promotional pricing strategy. We'll start with a brief overview of promotional pricing and explore its key benefits.

What is promotional pricing?


Promotional pricing is a strategy where a brand temporarily lowers the price of a product or service to attract customers and boost sales. It's often used to quickly increase sales, clear out inventory, launch a new product, or create a sense of urgency.

While this approach can effectively drive immediate sales, it can also reduce profit margins. As a brand, you need to weigh the benefits of higher sales volume against the potential impact on brand perception and long-term profitability.

Key promotional pricing advantages


  • Encourages Purchase Decisions: Lower prices can persuade hesitant customers to buy and create a sense of urgency, drawing in new customers willing to try the product at a reduced price.
  • Maintains Competitive Edge: Promotional pricing helps a company stand out in a competitive market by retaining existing customers and attracting competitors' customers with better deals.
  • Boosts Short-Term Revenue: Discounts increase short-term sales, providing an influx of revenue that can cover immediate expenses or meet annual targets, impressing investors.
  • Fosters Customer Loyalty: Offering affordable products strengthens customer relationships and loyalty, as customers appreciate businesses that respond to their preferences.
  • Simplifies Marketing Efforts: Reduced prices naturally attract customers with minimal marketing effort. Additionally, promotional visitors may purchase other full-priced items, further boosting sales.

How to create an effective promotional pricing strategy?


1. Define your discount strategy


This should not be done randomly but with careful planning. It's crucial to choose strategic days for sale periods. Additionally, avoid offering discounts too frequently and keep them predictable for customers.

For example, clothing stores typically have sales at the end of each season. Customers are generally aware of this and often wait for these sales to make purchases, which can increase your opportunity costs.

Additionally, consider leveraging data analytics to identify the best times for promotions based on customer behavior and purchasing patterns.

Align your discount strategy with your inventory levels and sales targets to maximize profitability. Offering exclusive discounts to loyal customers or members can also foster brand loyalty and increase repeat purchases.

2. Control your margins


Be mindful of profit margins. Large discounts can negatively impact company profits. While sales volume might increase, profits may not follow suit. Furthermore, regular discounts can result in poor financial performance for the year. 

If reducing prices hurts your profits, think about different ways to market your products without changing the cost. For example, you may choose to provide additional services such as complimentary shipping, product bundling, or exclusive content. Utilize customer segmentation to customize promotions for specific groups, guaranteeing that the discounts are focused and successful. 

Tracking and evaluating the effects of every promotion on your profits will assist you in adjusting your approach and sustaining a strong financial position.

3. Consider your brand positioning


Before implementing a discount strategy, carefully evaluate the potential impact it may have on your brand.

For luxury brands like Chanel, discounting can dilute the brand's exclusivity and prestige. Customers of luxury brands expect a high level of quality and exclusivity, and frequent discounts can undermine this perception. Luxury brands thrive on the notion of rarity and premium status, and discounting can inadvertently convey a message of desperation or declining value.

However, for other brands, smart discounting can be a powerful tool to boost brand visibility and attract a broader customer base. Strategic discounts can create a sense of urgency and incentivize purchases, making it easier to move inventory and introduce new customers to your products.

For example, many brands or retailers often use discounts to remain competitive and to clear out seasonal stock, thus keeping their offerings fresh and appealing. Smart discounting involves timing and targeting the discounts effectively. For instance, offering discounts during peak shopping seasons or in response to competitive promotions can drive significant traffic and sales.

4. Customize your discount promotions


Tailor your discount offers to different customer segments. If a customer has purchased a product shortly before a sales period, avoid sending them a promotion for the same product after their purchase.

This can make the customer feel cheated and reduce their trust in your brand. It's essential to be mindful of the timing of your discounts, particularly in personalized marketing efforts such as emails or banners.

Utilize customer data to understand purchasing habits and preferences, allowing you to offer more relevant promotions. For example, suggest complementary products or offer discounts on items they've shown interest in.

Personalizing discounts in this way can enhance the customer experience and drive higher engagement and loyalty.

5. Give loyalty discounts


Offer loyalty discounts to your special customers, primarily those who have been loyal to the brand for a long time or who frequently make purchases. These discounts serve as a reward for their continued patronage.

Additionally, sending something like a special birthday discount can be very effective. This gesture not only enhances the brand's value in the eyes of these customers but also makes them feel surprised and appreciated.

Implementing a tiered loyalty program can further incentivize repeat purchases. By creating different levels of rewards based on spending thresholds, you encourage customers to spend more to reach higher tiers and unlock better discounts or perks.

Personalized offers based on past purchase behavior can also make loyalty discounts more appealing, as they show that you understand and value each customer's unique preferences and shopping habits.

Things to keep in mind while using any promotional pricing strategy

 

  • Complex Calculations: Regular prices help companies stick to budgets and match customer spending. Discounts require careful calculation of profit margins and target audiences, and offer durations to maintain profitability.
  • Changed Price Expectations: Customers might delay repeat purchases, waiting for sales. Highlighting product value and running frequent promotions can keep sales steady.
  • Perceived Quality Issues: Discounted products may be seen as lower quality. Marketing should emphasize that high-quality products are offered at competitive prices.
  • Limited Options: Promotions often apply to specific products, limiting customer choices. Offering promotions on a variety of products or running single-product promotions throughout the year can address this.
  • Impact on Local Businesses: Continuous promotions by larger companies can disadvantage local businesses. Engaging with local business leaders and establishing fair competition policies can help maintain positive industry relationships.

Strategic discounting for sustained success with ChannelEngine


In summary, exercise caution when implementing discounts. Given the complexity of price promotions, consider the points outlined above. Start with a well-defined discount strategy, ensuring your sales promotions are unpredictable to customers.

  • Monitor profit margins closely, as increased sales do not always translate to higher profits. Evaluate the potential impact of discounts on your company, applying them only if they align with your brand positioning.
  • Foster close relationships with your customers by analyzing their stage in the sales process and offering tailored promotions. Avoid post-purchase discounts that could disappoint customers who paid full price.
  • Finally, reward loyal customers with special discounts to make them feel valued and to foster brand loyalty. Discounts should benefit both the customers and your business.


With ChannelEngine, you can effortlessly apply price discounts using our advanced ‘price rules’ feature. Price rules enable you to configure various pricing strategies for your products with ease.

Whether you want to apply discounts across an entire marketplace channel or target specific products, categories, or brands, the flexibility of our price rules gives you full control. You can choose to set fixed discounts or percentage-based reductions, ensuring your pricing strategy aligns perfectly with your sales goals.

Additionally, ChannelEngine's dynamic repricer is designed to keep you competitive in real-time. By automatically adjusting your prices based on market conditions, the dynamic repricer helps you maintain your minimum price threshold while optimizing for the highest possible buy box price.

This means you can stay ahead of competitors, capture the buy box more frequently, and maximize your profits, all while ensuring your prices remain attractive to customers. Our repricer continuously monitors your competitors' pricing, inventory levels, and market trends, allowing you to make intelligent pricing decisions that drive sales and enhance profitability.

Adjust your prices, strengthen your margins, and get ready to win in this ecommerce jungle with the support of our experienced team.

Book a discovery call with one of our experts today
Published on 20 augustus 2024
Timo Sprinkhuizen
Timo Sprinkhuizen is the Product Marketing Lead at ChannelEngine. He loves simplifying the complex by creating compelling narratives around advanced products for global audiences. Off the clock, Timo is all about tech, sports, travel, music, and good food.
Timo Sprinkhuizen
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