Price Promotion Strategy

Price Promotion Strategy

Price Promotion Strategy Jonathan Poland

A price promotion is a marketing strategy that involves temporarily lowering the price of a product or service in order to increase sales and stimulate consumer demand. This type of promotion can be an effective way for businesses to drive traffic to their stores, increase sales, and gain market share.

There are several different types of price promotions, including temporary price reductions, discounts, coupons, and rebates. These promotions can be targeted at specific groups of consumers, such as loyal customers or new customers, and can be offered through a variety of channels, such as in-store, online, or through email marketing campaigns.

One of the key benefits of using price promotions is that they can help businesses to attract new customers and increase sales in the short term. By offering temporary discounts or other incentives, businesses can entice consumers to purchase their products or services, which can help to boost revenue and drive growth.

In addition to attracting new customers, price promotions can also help businesses to retain existing customers and build loyalty. By offering special discounts or other incentives, businesses can show their appreciation for their customers and encourage them to continue shopping with them in the future.

However, it is important for businesses to carefully consider their price promotion strategy in order to maximize the benefits and minimize any potential drawbacks. For example, businesses should consider the potential impact on their profit margins, as well as the potential for damaging their brand image if they are perceived as constantly offering discounts or promotions.

Bottom line, price promotions can be an effective way for businesses to drive traffic, increase sales, and build customer loyalty. By carefully planning and executing their price promotion strategy, businesses can capitalize on the benefits of these promotions while minimizing any potential drawbacks. Here are some examples.

Price Discrimination

Price discrimination is a pricing strategy that charges price insensitive customers more and price sensitive customers less. For example, price sensitive customers may be willing to collect coupons to get a discount. Price insensitive customers are far less likely to use coupons unless they are easy to find and use.

Customer Acquisition

Discount offers that are only available to new customers. For example, an internet provider that offers to pay the cancellation fees charged by a competitor.

Impulse Purchases

Sales designed to create impulsive purchases. For example, an ecommerce site that has a 12 hour deal with a timer that counts down.

Behavior Reinforcement

Sales that encourage habitual purchases such as a sale every Tuesday at a hardware store that encourages customers to visit weekly.

Customer Visits

Sales that are designed to get customers to visit such as a loss leader whereby you offer a single product at an unprofitable price to attract customers.

Tit for Tat

In some cases, a sale isn’t aimed at customers but at competitors. For example, quickly matching any sales by your competitors as a tit for tat response designed to prevent them from starting a price war.

Market Share

Sales designed to increase your market share whereby they are a long term strategy that may decrease short term profitability. For example, a night club that’s relatively unpopular that offers cheap beverages to grow its customer base.

Loyalty Breaking

A sale price designed to get the loyal customers of your competitor to try your product. For example, a cola that seeks to grab brand loyal customers from a competitor with a sale price of 50 cents a bottle where the competitor is charging $1.99.

Loyalty Reinforcing

A sale that leverages your base of loyal customers or that seeks to reinforce their purchasing behavior. For example, coupons mailed only to loyal customers.

Target Market

A sale aimed at a particular target market such as a seniors discount day.

Psychological Discounting

Sale prices and discount rates that are perceived positively. For example, sale prices that feel honest and low such as $9 as opposed to $8.99.

Revenue Management

Revenue management is the process of optimizing prices for inventory that expires at a point in time such as a seat on a flight or night in a hotel room. This calls for complex strategies that are responsive to inventory levels. For example, a flight that is expensive four months before departure that is steeply discounted if seats don’t begin to fill a month before departure.

Inventory Clearance

Sales aimed at preventing inventory problems or clearing inventory. For example, a seasonal sale in the middle of a season designed to clear inventory before it becomes out-of-season.

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