{"id":5421,"date":"2022-07-18T14:17:00","date_gmt":"2022-07-18T14:17:00","guid":{"rendered":"https:\/\/flintfoxisv.wpengine.com\/?p=5421"},"modified":"2024-10-02T04:53:29","modified_gmt":"2024-10-02T04:53:29","slug":"discount-pricing-strategy-guide","status":"publish","type":"post","link":"https:\/\/www.enable.com\/resources\/articles\/discount-pricing-strategy-guide\/","title":{"rendered":"Discount Pricing Strategy Guide"},"content":{"rendered":"\n

How you execute price discounts should be an integrated part of your pricing strategy and makes a big difference to the health of your profit margins. Managing your discounts properly ensures that the right discount is offered to the right customer for the agreed amount of time.<\/p>\n\n\n\n

What is discount pricing?<\/h4>\n\n\n\n

Discount pricing is a strategy where a seller will offer one or more of its products for a lower price than usual, for a limited time only. Designed to increase sales, it will either involve marking down prices or offering different deals.<\/p>\n\n\n\n

Customers love to get a bargain, so discount pricing can be very effective. But it\u2019s important to make sure that they don\u2019t perceive the drop in price as a reflection of the product\u2019s true value. That is where the limited-time-only offer comes in, and effective discount pricing strategies will focus on this to avoid devaluation.<\/p>\n\n\n\n

What are the 3 types of discount pricing?<\/h4>\n\n\n\n

There are three main discount pricing techniques. Which one will work best for you depends on your industry, your product, your objectives and your overall business strategy. They all have different benefits and can be used at different points in your sales cycle, so it\u2019s worth familiarizing yourself with all of them.<\/p>\n\n\n\n

Seasonal<\/em><\/h5>\n\n\n\n

A seasonal discount does what it says on the tin. A promotional offer on products during a particular season, or on seasonal goods. Increasingly the basis of a retailer\u2019s profits, seasonal sales events drive huge engagement, whether that\u2019s Black Friday and Cyber Monday, or the pre- and post-Christmas sales.<\/p>\n\n\n\n

A lot of this spike in sales volume can be attributed to the seasonal discount strategies, as everyone competes to make an attractive offer to consumers.<\/p>\n\n\n\n

However, there is no reason why the same tactics can\u2019t be applied during other high or low seasons to drive customer engagement. This could be matching the offers made by others on the market, or generating interest at a more unusual time when competitors are less likely to be offering promotions.<\/p>\n\n\n\n

Clearance<\/em><\/h5>\n\n\n\n

A clearance strategy centres around offering a product at an unusual level of discount, whether it is a flash sale or a buy-one-get-one-free offer. The discount provides a sense of urgency, and the idea is the consumers feel they have to make a purchase now so they don\u2019t miss out.<\/p>\n\n\n\n

These can be incredibly effective ways of driving interest outside of key yearly moments. However, they must be managed carefully to make sure that any spike in demand can be met by the business. This could be increased web traffic or the demand placed on fulfilment and shipping.<\/p>\n\n\n\n

Volume<\/em><\/h5>\n\n\n\n

Volume discounts reward consumers for buying products in larger quantities, often with bigger discounts given when more items are ordered.<\/p>\n\n\n\n

They\u2019re particularly useful for B2B or middleman businesses, where the customer base is more accustomed to ordering goods in large quantities.<\/p>\n\n\n\n

This pricing strategy can be a useful way of making a significant dent in inventories but again needs to be deployed correctly to ensure that the demand can be met.<\/p>\n\n\n\n

Changing the list price in your ERP<\/h4>\n\n\n\n

While changing the list price of a product in your ERP is a quick short-term solution, it can cause major financial headaches later. As a quick and easy solution for reducing the price for a large customer, changing the list price in your ERP hides the activity in standard customer profit and loss (P&L) reports.<\/p>\n\n\n\n

Why is this an issue? Because anything that cannot be analyzed, can\u2019t be managed. Customer-specific changes to the list price rarely have budgets and are prone to last longer than intended.<\/p>\n\n\n\n

This method of discounting masks the impact of a customer-specific list price. The pricing action is only visible when viewing the average list price across customers for the same product.<\/p>\n\n\n\n

Using rebates to incentivize your customers<\/h4>\n\n\n\n

Rebates are a more profitable way to manage the discounts you give to customers. With rebates, the discount incentive is held back until you can verify that the customer qualifies for the discount.<\/p>\n\n\n\n

By ensuring the customer has qualified for the rebate, you\u2019re not rewarding a customer who has not followed the agreed terms of the rebate.<\/p>\n\n\n\n

With rebate management software, you\u2019re able to ward off unruly retailers who claim bill-back monies owed from an invoice that\u2019s unrelated to the promotion’s products.<\/p>\n\n\n\n

Rebate tracking software can match the rebate expense back to the correct items and time periods for correct historical P&Ls. Meaning you can dispute any deductions that weren\u2019t owed, much faster.<\/p>\n\n\n\n

Offering off-invoice allowances to reduce financial risks<\/h4>\n\n\n\n

Off-invoice allowances are the way to go for a clear picture of the discounts offered at the time of sale. With the discount applied at the time the invoice is created, it means that the trade spend is expensed at the time it\u2019s incurred.<\/p>\n\n\n\n

So if a customer purchases an agreed amount of a certain product, you can apply the discount immediately, with no outstanding liability.<\/p>\n\n\n\n

Having rebate and promotions management software to manage these allowances gives you the ability to control the off-invoice discounts and protect your margins. It gives your sales team the tools to achieve sales goals without letting discounts damage your profits.<\/p>\n\n\n\n

Pros & Cons of Discount Pricing Strategy<\/h4>\n\n\n\n

Pros<\/em><\/h5>\n\n\n\n