SALES, BARGAINS and DISCOUNTS... are they really helping your business?

The real cost of discounting...

SALES, BARGAINS and DISCOUNTS... are they really helping your business?

It's the popular business tactic that has been preferred for decades. Customers all around the world love an end of season SALE or search for DISCOUNTS.

Although bargains, sales events and special price offers are attractive to the consumer, they may not be entirely beneficial to the business. 

Recent research show that they be causing more harm than good, finding that, if given the option, 63% of customers would prefer 'every day lower price' rather than sales. 

Barry Urquhart is a business analyst and a marketing strategist from Marketing Focus, and says every day lower prices mean consumers 'have the control, the choice and the determination of when they buy, what they buy at the price that they know is fair, reasonable and represents good value'. 

Mr. Urquhart sited that although flashing sales signs are attractive, they don't inspire customer loyalty. 

'(Sales) draw their attention, not their loyalty. The moment you're not the cheapest you lose their business. The glowing example of that is Coles can say down, down, prices are down, but when Woolworths determine that they are going to spend a billion dollars over 18 months to become more price competitive. All of a sudden in very short term, Woolworths ascends to being number 1 in terms of consumer attention and loyalty and market share, and Coles at the moment are struggling because now they are not the cheapest.'

Woolworths posted nearly a one billion dollar profit for the first half of this financial year (to December lat year).

Mr. Urquhart also warned that sales promotions had a cost to the business that wasn't so obvious.

'Now, sales and discounts are premised on the fact that as a point of being attractive there will be more business done and therefore you will overcompensate for loss of profit that is affected because of your lower prices. Interestingly enough when you look at the facts and figures you start to multiply everything with fixed and variable costs, if you lower your prices by 10% at a 30% gross profit, you actually have to increase the volume of your business by around about 296%'

He suggests adjusting your business model for lower prices across the board, and advertising that fact, as one that would lead to more success. 

'We (the business) will make sure that we increase the volume, velocity and productivity of our stock, and we'll turn out stock over a lot quicker therefore our business model will be we will be leaner, meaner and hungrier...'

For more of Triple M's chat with Barry Urquhart please consult the Catch Up link below:

Or for more information or advice about marketing for your business, please contact Marketing Focus and Barry at the following link: