If you’ve ever given a discount before, chances are that it has stemmed from fear—fear of losing a sale, fear of failing to close a deal, fear of not winning a new business, and more. This is true for most, if not all, businesses at some point. Discounts have become a regular part of business, and while it may seem like a great way to ensure your goals are met, this obsession might leave you wondering if it is even worth it in the first place.
Just like all things in the world, there are pros and cons to discounting. However, we’re going to focus on the pros of discounting, sharing with you a few reasons you would want to utilise discounts:
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Get Rid of Old Inventory
Do you have any old inventory lying around? Do you have too much of a particular product? If so, then getting rid of them quickly might just be more worth it than trying to sell them at their original price, albeit slowly. This is because old inventory unnecessarily takes up space where new inventory could be in. This can seriously impact your ability to make sales, especially if your audience is no longer interested in your older products. As such, giving them a hefty discount is an excellent way to make some quick cash while still freeing up your warehouse for new inventory!
Old or slow-moving inventory may be costing you money to keep. Think about interest on your overdraft (if you have one), or what you could do with the money if that stock was sold. If you are running a good inventory system, then you can produce reports to identify this slow-moving stock and set a plan to reduce the price to move it on. There are some great systems around. You might want to take a look at Dear Inventory or Unleashed. They integrate beautifully with Xero and other accounting systems.
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Motivates People to Buy Now
If planned carefully, discounts can be a great way to massively boost sales and even reduce time in the sales cycle so that you can convert your stock to cash quickly. Of course, the sales you make still need to be profitable. Revenue itself might seem a lot if you discount heavily, but the real factor to look at here is the profits you make on the sales. No profits mean no money being made, and no money means no sustainable means to keep your business running! In other words, ensure your discounts still net a profit!
It is critical to know the average cost of your inventory. You need to try very hard to sell at above this average price, or you will be losing money. Again, a good inventory system will help you identify these numbers and help in your strategy to sell the stock.
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Keeps Your Staff Busy at Work
When your business isn’t selling anything, your staff will be laid back, even lazy. Pair this with reduced hours and the drop in work motivation, and you might just have yourself a workforce that no longer cares about your business. In the long run, more and more of your employees will end up leaving for other opportunities. As such, to keep them busy and motivated to work, a great way to spark more sales is through discounts or seasonal sales. When more customers show up to purchase stuff, the more your employees are engaged, keeping them busy and even happy at their job!
These days, we see more and more stores having a SALE. Sometimes they jump from one SALE to another. It might be an End of Lease Sale, it might be a Stock Take Sale, End of Summer Sale, or something else. People soon catch on to the fact that you are always having a SALE. Plan for a good one and don’t do it all year round
Another way to keep your team amused is to get them to take photos of your stock and promote them on Social Media. This is a completely different topic, but one that can help with keeping the team busy. Make use of the time you are paying for. Get posting, get people interested in your brand, and get them buying from you.
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Exposes a New Model to the Audience
People aren’t always open to change, and when you do decide to change your business model, people might be a little afraid to try it out. A little discount can be a good incentive for them to adapt to the new business model. For example, if you just started selling online, you can offer promotions and discount codes to redeem if they check out on your online store! Keep in mind, however, that what you are doing should be sustainable. Also, be transparent about future rates to help customers know what will happen once the promotion is over.
Conclusion
Remember, don’t just read this and think that discount is what you must do right now. Discounts, although full of pros, also come with their cons. Always take the time to carefully understand the ups and downs of discounting to help you know whether this is the right tactic to pick. If you do decide to utilise discounts, do it smartly. Remember, revenue and profits are two different things. Your task is to implement a strategy that interests customers and is sustainable profit-wise, creating a win-win situation no matter what.
Running a business is often a balancing act, but we can help stabilize your strategy by offering financial mentoring services aimed to grow your small business. Contact the team at MKS Group to learn more about ways in which your business can grow. (03) 9374 8400.
