To remain competitive, many brands offer discounts throughout the year (including the holidays!) to increase their sales. But as a solopreneur or team-of-few, it can be difficult to figure out how to be part of the conversation without sinking your bottom line. The key to a successful promotional strategy is identifying ways to spend a little and reap more profit in return. To determine what will be most effective and beneficial for your business, take some cues from psychology lessons in pricing, as well as best practices for promotions.
Before you break a sweat, rest easy. We’re here to share some tips we collected from Faire’s most seasoned makers.
Think carefully about your profit margin
If you started your own business from the ground up, you’ve probably given thought to profit margin. This is simply how much money you take home after you pay all of your expenses. As an example, if you’re a candle maker and each creation costs you $10 to make and you charge $20, that’s a $10 profit. When you’re thinking about running a sale, crunch the numbers first. How much of a discount can you afford to offer on your products? Don’t run a sale just for the sake of having one–make sure you have some wiggle room to play with. Buyers may be more inclined to initially purchase when you have a promotion available, but once they fall in love with your brand, they’ll be more likely to return and purchase more at a higher sticker price.
Use the power of ‘9’
Without realizing it, you may be duped by the number ‘9’. Studies have indicated that folks are more likely to buy something if the last digit of the price is the number nine, vs. any other number. Most recently, the University of Chicago and the Massachusetts Institute of Technology teamed together to dig deep into this psychological theory. They put two prices on the exact same product: $34 and $39. Even though $34 is cheaper, more people bought the product when it was $39 since it alluded to the fact it was on sale. Take a look at your prices and see if this trick could work for you.
Give something for free (that doesn’t cost you much)
Ever order something online and when it arrives, there was a little something extra added in? Or, when you check out at a department store and they throw in some samples of perfume? There’s no doubt about it: people like free stuff. And, why shouldn’t they? As you think about your promotional game plan, figure out if there’s anything you can add as a ‘free gift with purchase’ that doesn’t cost much. Customers will be excited about the goodie, which will encourage them to come back in the future.
Ask most entrepreneurs and most of the time, they enjoy being busy. How come? Having a long list of deadlines, deliverables and tasks to complete helps encourage productivity. After all, if you have a week to do something, you’ll likely take your time. But if you have 24 hours? The pressure is on. The same concept is true for any type of deal you offer during the holiday season. Discounts should only be available during a certain time frame, and you should remind current and potential customers to act fast. While it’s a bit of tried-and-true marketing lingo, there’s a reason it’s applicable for every industry. When time is running out, people are more likely to purchase than if they have all month long to make a decision.
Your first goal is to increase your sales while you’re running your promotion. Your second goal? Retention. What’s the point in running discounts if no one will return to shop again? Before you start your sale, have a plan in place to thank each and every customer. This could be as simple as a thank-you note after a purchase. You can also take this opportunity to ask new customers for feedback on your products, or to leave you a review if they are happy with their order. For those shoppers who have been with you from the get-go and remain loyal, illustrate your appreciation for their business with a more personalized message.