1. Know your customers
The psychology of pricing is complex but a good place to start is understanding the different types of customers you have, as this will help you with setting your sales pricing strategy. Ask yourself:
- Who are your main types of customers?
- What other types of customers would you like to attract?
- What’s the standard for sales in your industry?
- What do your customers value? Is it primarily price, value or quality?
Retail insight: Understanding the differences between Researchers, Bargain Hunters, Brand Loyalists and Connoisseurs can help you set your sales prices, says the Retail Insights report.
2. Set sales objectives
There’s more than one way to run a sale, and aligning to your long term business strategy will give your business some good grounding. Common goals for running a sale include:
- Attracting new customers
- Increasing customer traffic
- Building market share
- Boosting year on year growth
- Increasing revenue.
Keep in mind attracting longer term loyal customers and boosting market share can be more challenging than quick wins like increasing revenue.
Retail insight: Price sensitive customers are attracted by sales but they’re often Bargain Hunters and Researchers who aren’t likely to stick around once your sale is over, says the Retail Insights report.
3. Decide on sales tactics
Think about what sales tactics you could use and choose something that resonates with your customers. Some common options include:
- Percentage based discounts
- Dollar based discounts ($5 off)
- Blanket discounts (25% off store wide)
- A free gift offer (buy one coffee, get one free)
- Free shipping
- Product bundling - where you package similar products into one deal, for example, a computer with a keyboard, mouse and software.
The type of sale you decide on should directly relate to your customers (again, it’s about knowing your customers) and what’s proven to make an impact.
Retail insight: Retailers tend to underrate the effectiveness of free shipping which is highly valued by a number of shoppers, says the Retail Insights report.
4. Are you giving away too much or not enough?
The CommBank Retail Insights report found customers respond best to percentage based discounting and generally customers named a figure of around 25-30% for them to buy something they weren’t planning to. This means if you discount too much at the beginning of a sale you run the risk of making sales that could’ve happened anyway with a lesser discount.
It's important to make sure you align your sales pricing with customer expectations, whist making an impact and not devaluing your brand or your loyal customers.
For more information on sales and pricing, take a look at the CommBank Retail Insights report.