You know how the saying goes: where there’s demand, those with the supply win. This couldn’t be truer during the holiday season, when people who aren’t typically big shoppers head out to find the perfect gift for someone special. And even after the holidays, buyers are looking for deals on clearance inventory. Many shops offer discounts to remain competitive and to increase their sales through the end of the year. 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 December 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 from Faire’s most seasoned retailers.
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 purchased candles for $10 a unit and you charge $20, that’s a $10 profit. When you’re thinking about what sales to create in December, crunch the numbers. What are the least expensive products you sell that yield the most money back in your pocket? Those are the ones you should discount, since you have wiggle room to play with. People may be more inclined to initially choose those sale goods, but once they fall in love with your shop, 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’. In fact, 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 eluded to the fact it was on sale. Crazy, right? Test this trick yourself, and see if your numbers follow suit.
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 December long to make a decision.
Your first goal of the holiday season is to meet your sales projections. Your second goal? Retention. What’s the point in during one promotion after another if no one will return to shop again in January, February, and so on? Before you send out your discount details, have a plan in place to thank each and every customer. This could be as simple as an email asking for feedback and offering a percentage off their next purchase. For those shoppers who have been with you from the get-go and remain loyal, take the holiday season as a chance to give back and illustrate your appreciation for their business with a personal email and offer.
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