Posted in Marketing and Strategy Terms, Total Reads: 580
Definition: Pricing Discounts
Pricing discounts are used as a short term strategy in pricing to increase traffic and boost sales in the short term. If this is used as a long term pricing strategy, there will be more negative effects on market positioning and brand loyalty.
This strategy is normally used in short term to sell low priced products in large quantities. In the long term, it brings down the ability of the brand to sell at a full price if used too often. So it should be used once in a while to maintain the competitive edge and drive sales. When such discounts reward loyal customers accordingly, they are even more effective in retaining customers.
• Builds customer loyalty if used to reward loyal and repeat customers
• Loss leaders can be sold in this way and they also help in increasing traffic at the store which helps in increasing sales of other products as well
• Revenues are raised temporarily during the discount period
• Can be used to clear the stocks of out-of-date stock or old stock in end-of-season sales
• Pricing discounts are also used to encourage distribution channels to perform some function
• Product positioning should be carefully chosen so as to not make customers think that low cost products are of low quality
• Not all customers make decisions based on prices, so this strategy should make sure as to not drive away the customers who are not price sensitive
• Low prices normally do not build customer loyalty because the price sensitive customers just buy the product where ever it is at the lowest price
Examples of pricing discounts are end-of-season sales, festive offers, etc.