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Strategy   URGENT - Need Help Fast!  
 
This question has been closed, and points have been awarded.
Impact Of Discount Prices (sales)
Posted By: sandip2065 on 12/7/2004 11:17 AM (CST) 125 Points
I have heard that having sales on your products can hurt your brand and create buyer confusion. My question is that if revenues are low, does having a 20% sale in a given month create problems for future purchases? Today it's 20% off then next month, it's back to retail. Does this create a problem? Does this make you a bargain center or create price wars with yourself?

I would like to focus long-term, but would like to jumpstart the long-term by having growing revenues in the short-term. I want to have a 12 days until Christmas Sale, which would feature different products on sale, or new offers, or free gifts/shipping on certain days. Does anyone have better ideas or critique for my current idea?

Posted by: Sharon Moderator Response
12/7/2004 11:26 AM (CST)
It really depends on your brand and the strength of that brand. Controlled sales I think happen with almost every brand without hurting it. I know that AllClad, a high end cookware brand, carefully controls its retailers and pricing. If a retailer independently reduces the price on an AllClad product, AllClad will cut them off their distributor list. But the company authorizes sales regularly, depending on corporate goals, mostly in the entry-level and set product lines. That's just an example of how to use sales to support and grow the brand.

Can you tell us more about your product and its distribution? Do you distribute via retailers or are you direct sales? If you are having a Christmas sale, I have to assume you are selling to consumers not businesses. What in your opinion is the strength of your brand?

We'll be able to help you more here at MarketingProfs if you can give us more detail.

Good luck.
 
Posted by: sandip2065 Author Response
12/7/2004 11:31 AM (CST)
Thank you for the example. The strength of our brand is quite high in our niche industry. We are an online retailer that distributes our products only to consumers. The product ranges from $55 to $89. We have a few resellers that also sell our products. Will this hurt our resellers? Does having sales like a christmas sale truly work? The last thing I want is a buyer to think, "Well it's $45 today maybe next month it will be $35."
 
Posted by: sandip2065 Author Response
12/7/2004 11:35 AM (CST)
Also, how do buyers perceive sales. Does having a sale on items today of 20% and 2 weeks later, having the price be back to the same it previously was have a negative effect?
 
Posted by: W.M.M.A. Member Response
12/7/2004 11:42 AM (CST)
Buyers accept and welcome sales, as long as you do not continually have weekly sales, such as constant weekend sale, or Wild on Wednesday sales...this gets old. the consumer is educated and will not believe you, in the end.
Christmas sales...absolutely.

Randall
WMMA
 
Posted by: sandip2065 Author Response
12/7/2004 11:45 AM (CST)
While I still would like help answering the orginal questions, do you think having a Thanksgiving Sale and Now a Christmas Sale is too much? Do you think this will only effect short-term revenues and have a drastic effect on long-term sales?
 
Posted by: tjh Accepted Answer
12/7/2004 12:12 PM (CST)
I have heard that having sales on your products can hurt your brand and create buyer confusion. My question is that if revenues are low, does having a 20% sale in a given month create problems for future purchases?

- Even a sale won't help if your products are normally hard to sell, have reputation (brand) problems, are viewed as having no particular USP, or have heavy returns/refunds, are commodities prospects think they can get for even less than your sale price;

- Harm future purchases? Only if you ignore some lessons learned by those in some other industries that discounted heavily, but now discount more judiciously - meaning:

(a) Always state a rational reason for the sale. Prospects will connect the sale with this special event, rather than your long term pricing models. Almost any rational reason will work, even the mundane "Holiday Specials", "Overstock", "Invitation Only Holiday Specials for Our Customers Only", etc. Not stating a real reason makes you look like any-old-discounter, or worse, makes you look desparate.

(b) If you don't want to blanket discount across all product lines; (1) consider bundling similar products and discounting the package, (2) discount other bulk purchases (Buy some, get some more free... etc.), (3) Make special offers only on a few, very popular products, with suggestive selling at the end.

(c) Be very clear about the time span of the offers. "Offer Expires 12/31/04", or "until stock is gone", or some such.

If you're trying to drive "right now" traffic - and you're convinced that a sale is the answer - discounting is probably best done on mainstream, core products - things that people obviously want or need, and the offer must be compelling, irresistable. Combined with a realistic rationale for the sale, for a limited time, with a Very attractive offer, you should drive in more revenue, and maybe attract some new customers as well. (Of course, providing you promote it heavily.)

This type of sale should be very rare in your planning. Customers don't need to build the wrong image of you. Plus, successful sales are the heroin of cash-flow hungry businesses. In most cases, discounting is best handled as a short term tactic. To elevate it to a long term strategy ("we're the low price leader...") is a completely different matter, and not for the fainthearted.

As to your resellers, yes, some will squawk. One approach may be to discount their wholesale price during this period also, and depending on your product and inventory, maybe ration how many each will be allowed to sell.
 
Posted by: sandip2065 Author Response
12/7/2004 12:48 PM (CST)
Anyone else? I appreciat the help TJH. Does anyone else have ant thought or ideas to push some more sales with a holiday sale? I am open to suggestions.
 
Posted by: jillm Accepted Answer
12/7/2004 1:31 PM (CST)
I have to agree with what was said above -- having an occasional seasonal sale won't hurt your brand image. If you have sales too frequently, however, people will begin to take the sales for granted. For example, a major retailer in my area has been having "time limited" or "one day only" sales recently --every weekend-- which has taken the urgency out of getting to the store for the sale... as we know that there will be one again next weekend.

Be clear with your sale verbiage -- the sale ends on a set day. Prices will go back to regular retail. This will send two messages: 1. buy now (there's urgency!) and 2. your product is valuable, and you are holding to that value.

Definitely consider tjh's idea of passing a wholesale discount along to your resellers so that they will carry the sale price as well. This will keep your channel conflict to a minimum, and will create good will with your resellers. (As they then stand to profit from the sale as well...)

Best of luck to you,

Jill
 
Posted by: sandip2065 Author Response
12/7/2004 2:30 PM (CST)
I appreciate the great responses. Does anyone have an estimated time frame for which this sale should last? How long is too long, or how soon is too soon for a holiday sale? Thanks again for all the insight!
 
Posted by: D4Demand Accepted Answer
12/7/2004 3:53 PM (CST)
Sale timing is always an issue.

I say 10 days to 14 days.

As for Christmas sales, this is a zero sum game. Folks will buy from you or from someone else for a Christmas gift. Not both.

To avoid the Sale expectation for next year, take a tip from the cosmetics industry. Use your creative brain to come up with a companion gift for the holidays next year. Tie it purely to the brand and include it with every purchase as a bonus gift to the giver of the gift.
 
Posted by: Peter (henna gaijin) Member Response
12/7/2004 4:07 PM (CST)
Sandip - what product are you selling? You talked about a computer training product in a prior question - is that the same product for this question? Knowing this may help guide the responses some.

Sales are good for motivating someone to purchase. They are not good for getting initial information of the product out (except in low cost products, where you are trying to get them to try it in the hopes of the repeat business).

So, you want your sale to take someone who is looking and motivate them to buy, you should do it when they are looking. Retailers in the States have sales right after Thanksgiving because that is the traditional start of the Christmas buying season. They are motivating that sale, but also trying to get people in to their stores to buy other (hopefully not as much discounted) items.

In regards to the sale hurting your channels, what value does the channel ad? For example, do they reach customers who wouldn't find your site? Or do they provide additional value added? If so, there is not much risk there.

 
Posted by: mbarber Member Response
12/7/2004 4:41 PM (CST)
Gidday Sandip the ultimate answers is 'it depends'. As others have pointed out, if you keep having sales they not only generate lower results, they do position your brand as a discounter.

Take a leaf from the tactics used by top class negotiators - if you make a concession you MUST give a reason.

So if you do a 20% sale you run an ad with a 'mea culpa' (my fault/we stuffed up) message and say something like -

"Hey there customers we made a huge mistake. We ordered too many of the 'x, y & z products on the last shipment and now we need the space for our new stock about to hit the floors in the next couple of weeks.

AND THAT'S GREAT NEWS FOR YOU

Why? Well to create the space we need, we are giving you 20% OFF EVERYTHING we have. But it will be for a strictly limited time of two weeks so by 15th of December, your chance to get a great deal on 'X, Y & Z will be gone'

The 'reason' needs to be legitimate, be open and humble about it and make the offer a VERY good one (in the minds of the customer). You'll be able to shift your stock without discounting the perception of your brand value
 
Posted by: sandip2065 Author Response
12/7/2004 4:49 PM (CST)
All fantastic ideas and thoughts. Yes, this is for the training materials we provide. Last question and I will end this discussion (promise). Do you recommend a % across the board, % off certain products, or adding a "bonus" product on orders of a certain dollar value. Thanks again for all the great responses.
 
Posted by: tjh Accepted Answer
12/7/2004 5:41 PM (CST)
In my experience, "% Off" is usually not as effective as a hard dollar number off, even if you quote the full retail value. The rare exception may be a very educated audience, or professional buyers. ("10% off what? Let me do that math, nah, too hard. Slows me down...")

Generally, pricing should be obvious. After you've built value in their minds...

Adding a bonus gift, scaled to meet rising ticket values, is always an interesting idea that you'd want to test.
 
Posted by: mbarber Accepted Answer
12/7/2004 9:58 PM (CST)
Bonus products work best when the perceived value of the bonus product is high in the consumer's mind.

% off works best when the product is typically expensive and the discount would bring it into the reach of people who would otherwise not be able to afford it

And don't discount the benefit of doing a % of or cash back option. This is where the consumer can have % off a group purchase or a cash discount on one item.
 


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