The Navigator Newsletter: Promotional Pricing, Timing and Impact

Promotional pricing can be an effective tool for businesses to quickly increase sales, clear out excess inventory, or introduce new consumers to your brand. However, it's important to understand potential risks associated with using promotional pricing. This way you don't devalue your brand in the long run. It’s also important to consider the best time to introduce promotional pricing into an assortment. While it can be effective in the above considerations, if not managed carefully, it could damage your brand’s reputation and trustworthiness.

Consider using promotional pricing only when it has a clear purpose, preferably to drive higher sales because it will reduce profit margins. To protect brand integrity, your promotions should make sense and be responsible, reasonable in length, and properly communicated to customers. A great promotional incentive does no good if it's not delivered to the consumer.

TIMING: The timing for introducing promotional pricing in an assortment will depend on several factors. Factors like, does the product have an expiration date (seasonal items, food stuffs, date driven materials). Other factors, are the type of product being offered, the brand’s target audience, and the company’s overall marketing strategy. It is critical to introduce promotional pricing during periods when the demand for your product is high. Also not when you're introducing new looks or styles that could compete for the same dollar. Meaning you're trying to open up inventory dollars with a sale, but you have new product going to market at the same time. If you make the customer choose how to spend their dollar, they will most often spend where they can get more for their dollar or save money. They will typically not select the new product so you end up not have good data/results to tell you if the consumers like the new items. Making it difficult to plan your assortment going forward. If you’re offering discounts during low demand periods, it can be viewed as a sign of desperation and potentially damage the brand’s trustworthiness.

DEPTH OF DISCOUNTS: Also, it's important to limit the range of products included in the promotion so that it doesn't devalue your brand’s overall offering. Too much discounting can lead to customers expecting discounts all the time, which can further damage the brand’s value. Be mindful of the types of promotions used. Rebates and coupons should be used sparingly and only when necessary. Finally, it’s important to limit promotional pricing to specific target audiences. For example, if you’re targeting a younger demographic, you might want to offer discounts geared towards that specific demographic. You can also target certain customer segments, such as those that have recently purchased from your company. When managing promotional pricing, it's important to also consider the impact on your brand and pricing structure. An example, if you offer a 50% off coupon for every purchase, customers may begin to expect that same discount and you will lose some of the perceived value of your product.

Overall, the best time to introduce promotional pricing in an assortment while protecting brand integrity is when demand is high, when the range of products included in the promotion is limited, when the frequency of promotional pricing is reasonable, when the types of promotions used are appropriate, and when the target audience is appropriate. By understanding the potential risks and measuring the success promotional pricing efforts you're achieving the desired results managing promotional pricing with caution. Preserving the integrity of your brand and driving new volume will help take your business to another level.

Sam Hupp?is an industry expert and the Chief Strategy and Revenue officer for?BuddyLove?clothing company. An accomplished Senior Executive with more than 25 years of success in the apparel, fashion, luxury goods, watch and jewelry, industries. Sam brings corporate level insight to organizations?seeking expert assistance with operations analysis, event engagement, revenue growth, and business turn around.?