We see businesses do it all the time. When the going gets tough, they slash prices to numbers that are borderline offensive. Sure, they bring in customers, but at what cost?
There’s obviously the loss in profits but there’s also a decrease in credibility that can have lasting effects on your brand. In this article, we’ll discuss the appropriate situations where you should consider discounts along with alternatives to discounting that can save both your profit margin and your reputation.
Signs You Need to Consider a Plan B
So when do things go from concerning to critical? It helps to know the difference between a rough patch and a trend. Here are some of the most crucial situations when you need to take action to protect your inventory space and appearance.
Need Room for More Profitable Inventory
If there’s a new product about to hit the market and you’re one of the first to know about it, you can expect high demand. So it only makes sense to clear the shelves and make room for your windfall inventory. This means taking a look at what you currently have, running some reports, and discounting any and all products that you need to move in order to make a higher profit from your new products.
Product Was Unsuccessful
Even if it looks great on paper, some products just don’t sell. Whether a change in pop culture is to blame or poor market research, keeping a product on your store shelves that no one wants can make your business appear as an amateur. If you’ve only sold a handful of units with no improvement in sight, it’s time to do what you can to move the product.
Too Much Inventory, Not Enough Time
This situation applies to seasonal items usually. Think of all the discounts that pop up on holiday items after the New Year. While the best thing to do is only order as much as you will sell, there’s no formula to give you an exact answer. So if you overestimate your product needs and still have plenty on the shelves after the demand has passed, discounting is a great idea to make room for the next seasonal item.
New Business
Brand new to the business scene? It doesn’t hurt to run a promotional discount to get new customers in the door, make some sales, and begin to promote your brand. But this should be temporary and the discount shouldn’t be overly aggressive. This can end up hurting your business in the end.
Why Alternatives to Discounting Need to Be Considered
Before you put up your “Krazy Dealz” sign outside your business, you should know there are alternatives to discounting that can help save face. While there are always reasons for giving discounts from time to time, here are some reasons to consider discounting alternatives.
Belittles Your Value
Think of your local discount store. You head there when you need to save some cash but what do you expect when it comes to service and quality? Probably not much. This assumption can follow your business if you consistently discount products. Customers come to expect deals and when you ask for market value, they feel betrayed and take their business elsewhere. Take some time to learn how discounts affect consumer behavior and you’ll see where the problems lie.
Little to No Profit
This may sound obvious but we need to go over it. When you discount your products to ridiculously low numbers, you can kiss your profit good-bye. In some cases, you can even lose money if your product had a less than ideal profit margin. Most businesses can absorb this type of loss from time to time, especially if the discount is to make room for a more profitable product, but if you’re new to the scene or having a rough year, this can spell disaster.
Markets to Wrong Clientele
Just as offering products at steep discounts can give customers the wrong idea about your business model, it can also bring the wrong customers in the door. You should have an ideal customer in mind and while this will vary based on your industry, most businesses are looking for shoppers who have the right budget and know that they’re receiving their money’s worth. But bargain shoppers just want the cheapest price and could care less what else you bring to the table. There’s no loyalty to gain and no boost to your customer base because they rarely return.
Tradepay Eliminates Bargain Prices
One of the best alternatives to discounting involves trade, but probably not in the sense you’re thinking. While trading products can leave you in a better spot than where you started, it’s still not ideal when you’re trying to recoup your lost sales. Instead, turn to Tradepay.
Tradepay allows you to sell your items to an entirely new set of affluent customers. These customers might not be your ideal target audience when it comes to your local brick and mortar store, but on the Internet, everyone suddenly becomes your ideal customer. The best part about Tradepay is that everyone’s there for the same reasons. They’re either looking to sell, without losing face, or buy products at a discounted yet fair price.
How is this accomplished? Tradepay offers a unique payment system that provides both buyer and seller with benefits that basic trade transactions just can’t compete with. Sellers pay 60% cash and 40% Trade Dollars (Tradepay’s virtual currency). This allows them to spend less cash while providing you with a profit and your own virtual stack of Trade Dollars to use as you please.
You can then do a little shopping yourself and either restock your shelves with faster selling products or look into hiring local or global services to boost your business. You can even use Trade Dollars to reward employees for sticking it out during your stocking transition.
There’s virtually no limit to what you can accomplish on Tradepay because of the versatility of businesses on the platform. But what you can count on is doing business with like-minded business owners in an environment that’s pleasant, respectful, and beneficial for everyone involved.
Take a quick moment to explore Tradepay. You can be signed up in a matter of minutes and start moving products while avoiding discounting and protecting profits!
