Accounting Blog

Accounting Training, Tips, and News

Discount Pricing Strategy

How to Create a Discount Pricing Strategy

As a small business owner, you need to find new ways to attract new customers, keep current ones, and compete with other businesses. One way you can do these things is by using pricing strategies, which help you determine how to price your products or services. To increase cash flow, try a discount pricing strategy.

What is discount pricing?

Discount pricing is one type of pricing strategy where you mark down the prices of your merchandise. The goal of a discount pricing strategy is to increase customer traffic, clear old inventory from your business, and increase sales. Most businesses alternate pricing strategies so they don’t depend on discount pricing for long periods of time.

Be careful when using a discount pricing strategy. If you continually mark down costs, you could wind up losing money. And, customers might not feel a sense of value or urgency if everything is always marked down.

You can’t rely solely on discount pricing. Large companies often have lower prices because they can get bulk pricing, so it’s difficult for small businesses to compete with them. Emphasize the uniqueness of your products or services, and occasionally offer discounts for the most effect.

How do you discount a price?

If you want to use a discount pricing strategy, you need to know how to mark down prices. There are a few different ways you can offer a price discount. Here are some different kinds of discounts you can offer:

  • Loyalty member discounts
  • Seasonal discounts
  • Promotional discounts
  • Volume discounts

Discount Pricing Strategy

Loyalty member discounts

Offering a loyalty program at your small business is a great way to show frequent customers you value them. And, it encourages customers to buy from you more often. You can give members of your loyalty program discounts.

After a customer spends a certain amount or makes a certain number of purchases, they receive a discount. You can decide to give discounts on any product or service in your store, or you can discount certain products.

Some businesses send members discounts based on their buying habits. Using this tactic can help you upsell products as well. Loyalty member discounts can lead a customer to purchase more expensive, related items.

For example, you own a store that sells home items. You notice one of your loyalty members always purchases outdoor supplies. After buying a lawnmower, you give them a loyalty member discount for a hedge trimmer.

Seasonal discounts

You can offer seasonal discounts to all customers. With seasonal discounts, you can get rid of old inventory. Markdown items that are out of season.

For example, you own a clothing store. When it is almost springtime, you mark down winter coats. This encourages customers to buy the coats so you can make way for spring clothing and reduces the burden of inventory seasonality on your bottom line.

Promotional discounts

If you want to increase customer traffic and sales, consider offering promotional discounts. These are discounts you offer for a limited time. Typically, businesses offer discounts toward the end of a product’s life cycle.

Some businesses choose to offer promotions during holidays or other big events. Promotions you can offer include:

  • Buy one get one (free or half off)
  • Percentage off certain items

Volume discounts

With a volume discount pricing strategy, you offer customers a discount when they buy in bulk. You give customers a discount when they purchase more merchandise.

If you are a business-to-business company, a volume discount is especially useful. Many businesses need to buy goods in large quantities.

Let’s say you sell office supplies. You could offer a discounted price for customers who buy 20 or more boxes of 500 count paper.

Offering discounts for wholesale buying helps you get rid of some inventory, sell more items, and keep customers happy.

Don’t forget to market discounts

You need to be sure customers know about the discounts you offer. Promote these types of discounts in marketing materials. Use marketing tools like social media, email marketing, your business website, and even word of mouth (e.g., refer a friend deals) to let your customers know about your discounts.

Benefits of discounts

Discounts not only benefit your business— they also benefit customers. You might see more customers frequenting your store, increases in sales, and a higher bottom line in business.

If you are not on track to meet your sales targets, offer discounts. This could give you a boost and make sure you have enough incoming money to cover your expenses.

Offering discounts can also get rid of surpluses in inventory. Decreasing the amount of inventory you have allows you to make way for new inventory. Having too much inventory can lead to high storage costs or shrinkage.

Customers who receive discounts might have more loyalty toward your store. Discounts help make customers feel like they are getting better deals. And, customers who receive loyalty discounts might feel more valued.

Need a way to keep track of incoming money? Patriot’s online accounting software lets you record income and payments easily. Try it for free today!

This is not intended as legal advice; for more information, please click here.

Comments are closed.

See how easy our accounting software is to use!

Tired of overpaying for accounting software? Save money and don’t sacrifice features you need for your business.

Explore the demo

Or you can START A FREE TRIAL!