Promotional pricing is a sales strategy in which brands temporarily lower the price of a product or service to attract leads and customers. By lowering the price for a short time, a brand artificially increases the value of a product or service by creating a feeling of scarcity. Promotional pricing can help with customer acquisition by encouraging cost-conscious buyers to buy . It can increase revenue, build customer loyalty, and improve short-term cash flow.
A promotional pricing strategy works best in the short term. Used excessively, it costs brands money by eroding profit margins. Customers get used to lower prices – so-called “ price orientation ” – or they can stock up during the promotional period. This also adds to the noise in an already crowded market where promotions and tredz discount code are commonly used.
Promotional prices used – and by whom?
Promotional pricing is a popular strategy for mainstream brands, including retailers, airlines, gyms, restaurants, and service providers. B2B companies also use their own range of promotional prices. Brands use promotional prices to:
- Create buzz when launching a new product or service.
- Reward loyal customers.
- Increase customer traffic.
- Encourage repeat business.
- Move excess inventory.
Promotional pricing is a popular selling strategy. In fact, 80% of marketers say promotions and discounts are important in their customer acquisition strategy .
Yet the popularity of promotional pricing devalues a brand when overused. Most marketers use mass discount tactics – they offer the same promotions to everyone, making even more noise in a crowded and competitive marketplace. Instagram has 2 million active advertisers and digital marketing experts estimate that most Americans are exposed to 4,000 to 10,000 ads per day .
A survey found that when it comes to customer acquisition, nearly one in four buyers – the most respondents out of six categories – say differentiating from their competition is their most difficult problem. The urgent need to stand out leads to more frequent promotions across industries, but in a market overwhelmed by competing ads, they inadvertently add to the noise.
Types and examples of promotional prices
A promotional code pricing definition or a promotional tredz discount code definition covers a wide range of promotional pricing tactics, including:
Buy One, Get One Free (BOGOF). To celebrate Youth Soccer Month, Chipotle customers who wore a youth soccer jersey could “score” a free appetizer or meal for purchase or free over Labor Day weekend.
Coupons. A coupon is a coupon giving the holder the right to a discount for a particular product. Tackle Direct , a brand that sells fishing gear, offers coupons to people who have abandoned a shopping cart. The researchers found that the average cart abandonment rate is almost 70% .
Flash sales. For a very short time – sometimes just a few hours – brands will lower their prices to offload excess inventory, acquire customers, or increase profits. Travel brand Globus increased flash sales success by 20% by offering personalized promotions to military personnel. The company’s personalized promotion strategy reduced coupon abuse by 35% and spent 75% less effort and resources.
Loyalty programs. A loyalty program is a rewards program that a business offers to its customers who make frequent purchases. Since it costs five to 25 times more to acquire a new customer than to keep an existing one , loyalty programs are a popular type of price promotion. The Virgin Atlantic Flying Club allows members to earn points that take them to different levels. The higher the level, the greater the benefits.
Seasonal connections. Certain times of the year, such as Black Friday, Cyber Monday, or Veterans Day, are ideal for promotional rates. US News & World Report has a buyer’s guide on the best months to find the best deals.
Segment specific promotions.
An example of effective promotional pricing targets certain buyer segments, such as students, teachers, seniors, or the military. Caribbean , a travel company that offers low-cost luxury vacation packages to the Caribbean, Mexico and Central America, offers personalized promotions that are closed to nurses. When the brand launched its first nursing program, it recruited 8,000 36 new nurses to its travel club and reduced fraud by XNUMX%.
How to calculate the best promotional price for your business
perhaps the most extreme form of promotional pricing – is a good strategy for brands:
The type of business. Is there the capacity to withstand a huge spike in activity? Do the discounts match your brand’s position? If you’re a high-end brand like Apple, you only release certain products at certain times of the year, like laptops during back to school. If you are a value brand like Kohl’s, a rebate strategy could be one of your brand’s main attributes.
- Would offering a large discount hurt the brand?
- How do the numbers add up? Eight critical calculations include:
- Incremental cost of sales (the percentage of actual cost for a new customer)
- The amount of the average sale
- Percentage of reimbursement
- Percentage of coupon users who are existing customers
- Number of coupons purchased by each customer
- Percentage of coupon customers who become repeat customers
- The advertising value of promoting the company to a large number of people
- The normal cost of acquiring a customer through advertising
Another key calculation is the repeat purchase rate of a newly acquired customer. Frequent discounts condition consumers of a brand to expect a reduced price that they eventually know will come. A promotional pricing strategy is only successful when it helps a brand acquire high-value, loyal customers who aren’t conditioned to expect discounts. The best promotions are selective, targeted and strategic.