Don’t Break The Bank On Promotions



We all love them, especially as consumers. But how exactly do they work when you’re the business executing one? 

When it comes to promoting certain products, there is so much to consider. 

  • What kind of promotion are you doing: price discounts, BOGO, free shipping, etc? 
  • What product or service are you promoting? 
  • Should your price change be permanent or temporary? 
  • What is the target audience you’re trying to reach? 
  • When are you going to do this price change? 

This list goes on and on. 

In fact, we found that companies when using discounting promotions, only 16% found that the discounting they did was effective

Let’s break it down. 


Defining The Right Goals 

Before offering a promotion to your customers, you must establish specific and quantifiable goals that are consistent with your pricing and business strategy. Do you want to increase sales volume, focus on customer retention, or concentrate on new customer acquisition? 

Take a look at Aeropostale Inc (AERO).  Like many apparel companies, AERO wanted to have a seasonal promotion to ring in the Fall season. Their goal is clear: to increase sales volume and reach customers that are more price sensitive. aeropostale retailer promotions

Outlining your specific goal and target customer clarifies what your promotion will be like, making the next steps in the process that much easier. 



Targeting The Right Audience

When it comes to figuring out the target audience, consider the following:   Are you trying to get the attention of stingy or once-in-a-blue-moon customers in order to turn them into loyal shoppers? Or are you targeting the customers that value high-quality products that are worth potentially higher prices? This will help you determine what promotions to offer.

Creating a pricing inventory helps you list the inputs you need, have, and won’t obtain which will make pricing decisions easier and more effective. In order to use pricing to reach your objectives, you need to understand the market you’re entering, your competitors, the customers, and your product or service. 


Selecting The Right Promotion Strategy And Design

After you have a clear idea of the direction you’re heading, the promotion has to be on a product (or set of products) that matters to your target audience and that’s going to make them purchase during the promotion. If it’s not relevant or highly demanded, the promotion will not bring the desired results. 

In one of our studies, we found that when acquiring new customers was the business objective, companies found discount promotions were effective only 15% of the time. In the case of a sales increase objective, only 24% of companies felt discounting promotions were effective. It is important that the promotion strategy drives the desired goals. 

This is a good time to remember a key element of your value proposition: how you price your product is a direct message on how you view your own product. If you lower your price relative to your competitors, you’re telling your customers that your product is a bargain and an overall “good deal.”

However, if the product in question is highly-valued (think technology or designer brands) then with promotions – particularly large price discounts – customers may associate your product with inferior quality. Understanding your value proposition helps to do promotions better while defending the overall value.  


design handbag promotions


The Amazon Echo is also a great example. Amazon takes pride in its value proposition that combines high quality with affordable prices. Their product is already accessible to many customers, including those that are price sensitive. To incentivize customers to purchase, even more, Amazon still discounts Echos on days like Black Friday and Prime Day. This is something Apple does differently. Apple’s HomePods sell for around $200 which has made the purchasing process a bit more difficult for customers given the high cost. Apple’s ambiguous value proposition has cost them additional sales. 


The Big 3

The important thing to do is to focus on customer behavior. The promotion is about them. 

This is where exclusivity, scarcity, and value come into play. If a promotion is only applied to an exclusive set of customers, they will begin to feel special and a sense of belonging to a selective group. For example, think about those times you’ve signed up for a company’s email list. At times, email subscribers are given access to promotional deals before companies advertise online or in-stores. The customer’s excitement and sense of superiority for having “insider access” can push them to purchase more regularly from your company. 

In addition, if the product is scarce (and popular), that means it is low in stock and only a few people will be able to purchase. Scarcity alone can increase the value of a promotion by creating a sense of urgency. When something is limited, it can make people push the “buy now” button quicker leaving little room for any second guesses or pensive questions of “Do I really need this?” In fact, FOMO also comes into play here. People want to feel unique and having an item that is in high demand will do just that. 

Overall, promotions will give customers an opportunity to experience your product or service which reflects on your company and brand as a whole. This is your chance to provide something valuable and beneficial to customers that they would’ve otherwise not experienced had your promotion not pushed them to purchase. 


What To Avoid

However, you must be careful. While consumer behavior shifts with price changes, it can also change depending on how frequent your promotions are. 

Don’t underestimate the element of surprise.

If consumers can predict when you’re going to have a promotion, you’re doing something wrong. Switch it up a bit and don’t make promotions happen during the same time each week or year. This will encourage customers to “wait it out,” and I wouldn’t blame them. Because why should they purchase your product for full price today when you have promotions every first Monday of the month? Not only will you lose sales on full-price items, but your promotions will lose their effect as customers will just hold out and expect it. 


Final Thoughts

Ultimately, promotions are targeted, and short-term pricing moves. If you use a price discount promotion, you can attract more customers (new and old) and ultimately increase your sales volume to make up for the lower profit margins. 

How you manage promotions can be as important as the promotions themselves. Frequency, availability, and rules should not be underestimated. This influences the value of not only the products on promotion but also on the overall company and brand. It can also shape customer’s perceptions of fairness where “gotcha” promotions create bad customer experiences. An example is a BOGO promotion, but the rules are so specific to items customers do not value that the promotion itself and the response to future “deals” decreases. 

Done right, promotions can positively impact your business. It all comes down to your own goal: what are you looking to get out of this promotion?




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