Small business owners find new ways to attract customers and keep existing customers happy. It would be best if you worked on your own pricing as well as discounting strategy, wherein you reduce the price of your product for customers. Before giving a discount, you must keep 2 things in mind: 1.    **Product price:**  - Price of the product during the discount should not be kept really low that you pay from your pocket. 2.    **Product value/urgency:**  - If you put regular discounts on a product, the value/urgency of the product will get finished for the buyer as he can buy that product at a discount anytime. # **1 Aim of Discounting** 1.    Clearing old inventory/stock 2.    Attract new customers to use your product/service 3.    Reach sales target due to fewer sales during that period # **2 Techniques of Discounting** #### **Loyalty program** - Loyalty program is a good way for small business owners to tell their customers that they are valued. - It encourages customers to buy more products from you. - You can offer a loyalty programme discount offer to those customers who have purchased from you many things or have spent huge mount as he derives this loyalty discount. - Some of the businesses also decide the discounts on the buying habits of its customers. You can upsell some products by convincing them to buy more products. - These discounts can also help you to convince customers to buy more expensive products. #### **Seasonal discount** - This discount can be offered to all your customers. - It is usually offered to clear seasonal inventory/stock. - Garment shops usually give this kind of discount. - For example, after winter, items like winter coats, sweaters, etc. are put on discount as summers are coming and no one will buy winter clothes. - This way, you can finish your inventory that your bottom line does not impact. #### **Promotional discount** - If you wish to increase customer traffic/sales on your store or website, you can give promotional discounts. - These discounts are for a limited time. - They are usually given at the end of the product cycle, i.e. when you know that no one is going to buy the product now or you have launched a new product. - Some people also put promotional discounts during seasonal discounts as people go out during seasons and buy products on discounts. #### **Volume discount** - This strategy is offered to the customers when they purchase anything in bulk. - This strategy is mostly implemented in 828 companies as they usually buy products in volume. - For example, if you sell office supplies and a company bought 20 packets of stationery from you, you can give a discount of 20°/o. However, if the same company buys 50 packets of stationery from you, you can give more discounts. #### **Bundled discount** - In this strategy, instead of decreasing the price of your product, you add another product with it and bundle them together. This way, the price of the bundle decreases. - For example, the Body Shop is a beauty and wellness brand. They bundle their products and sell them at a discount. Like, shower gel and face mask can be bundled together; similarly, face pack and face cream are bundled together. - When you take products in the bundle, it is cheaper as compared to buying the products alone. #### **First-time shopper discount** - This discount is offered to the new customers on buying your product. - Incentivise the new customers so that they should at least buy a product from you. - This way, they will come to know about the quality of your product, and if they liked it, they would come again to buy from you. #### **Early bird discount** - This discount is for new products. - When you launch a new product, you want more people to buy and try it. - You can promote these products on a pre-discount offer with the help of flash ads, stickers, SMS, etc. - This way the customer will come to know that a new product is coming in the market and if he orders it before the launch, he will get a discount on it. - You can also attract the customers by saying that the first 50 people, who will or order the product, will get the discount. This type of offer looks exclusive, and the customer gets curious about falling in those 50 people. #### **Value-added offer** - You do not give a discount on the price of your product, rather give a value-added service/product to the customer. - The value-added service does not have any price, but it should benefit the customer. - Alternatively, for example, if you are a computer hardware supplier, you can give an installation guide to your customer or free installation support if he purchases your hardware. - Another example is, a hairdresser who is offering a service can give free treatment or a blow-dry or a haircut and will have to take out time for this extra service. #### **Event-based discount** - Many brands conduct sales for 2 to 3 days and give heavy discounts and schemes on almost every product. - For example, Big Bazaar’s sale goes on for 5 days, wherein people come and buy products for their home. - You can also put a discount on a particular day like on the anniversary of your store. #### **Discounts for special group** - In this strategy, you focus on a consumer group and give a discount to them throughout the year. - You can give discounts to army officials, school kids, or pregnant ladies/mothers. #### **Cash discounts** - These discounts are provided on the base price of the product only if the consumer makes the payment through cash. - For example, you offer a discount of 2% if the bill is paid within 10 days. - The purpose of this discount is to generate cash flow and reduce the transaction cost of the customer. - Usually, the cash discount is given in business-to-business transactions, when the client is negotiating on price range. #### **Store credit/subscription credit** - You can reward your customers with store credit/subscription credit. This way, they will purchase a product from your store only. #### **Exclusive membership** - This is above the normal discount as you offer exclusive membership to those customers who are special and buy more products from you. - Your premium customers get special benefits or discounts as they have purchased a lot from you. - For example, if you run a gym, you can give your premium customers personal training sessions, gift shop credit, and health drink offers. - The customer will feel that he is valuing you, and in return, he is getting the same value. #### **Refer a friend** - If you refer a friend to buy something from a specific store or website, you get a discount on your next purchase from the same store or website. - This discounting strategy helps you to get a new customer, and your existing customer also stays happy. #### **Discounts on social media** - You can promote your products on social media by putting up contests with prizes, conducting polls to reward opinions, etc. - You can interact with the customers and ask them questions. - This increases your followers on social media, and the customer also stays happy with the discounts you offer and seems excited to buy your product. # **3 Parameters of discounting** Now, you cannot give a discount to your customer just because you are in a good mood. You will have to make your discount strategies by keeping many parameters in mind so that you can earn some profit or at least you do not have to take out money from your profit. Some of these parameters are: #### **Know your gross margin, markup, and break-even point** **Gross margin:** -  Gross margin of a company is obtained when COGS (Cost of Goods Sold) is deducted from the sales revenue. **Markup:** - Markup is the cost of purchase that you take from the manufacturer, and then you include this markup in the selling price of the product to sell the product in the market. Markup covers various overhead expenses, and you also earn a profit. **Break-even point:** - The calculation of the break-even point tells you about how many sales you should do to cover your business expenses and generate profit. #### **Calculate the best discount price** You can keep in mind gross margin, markup, and break-even point, and other factors o calculate the best discount prince. #### **Market your discount** If you want new customers or in-active customers to purchase your products due to discounting strategies, you will have to market them. Some of the ways to market your products are: - Using marketing tools - Informing on social media - Doing e-mail and SMS marketing. - Using refer a friend deal Keep the marketing cost less and do not overspend; otherwise, it will be deducted from your margin. #### **Competitors** Look out for the discounts your competitors are offering or what the pricing of their product is and decide your strategy accordingly. #### **Duration of sale** - Remember, you will be selling your products at a lower price throughout the sale. - Therefore, you must have an idea if your sale should go on for 10, 15 or 30 days. #### **Offer to upsell** - Apart from the discounted items that a customer will purchase, you can pitch him non-discounted items as per his profile. - This helps in increasing your margins. #### **Know your customer lifetime value** - This tells you if the customer likes your product and what the areas of improvement are. - Here, you are working to retain your existing customers by using e-mail marketing, social media marketing, and discounts. - You will have to make new custom r but also have to concentrate on the customer. #### **Know what to markdown** - If there are any new products for which the customer is ready to give the full price, you should not put them on a discount as they have been recently added to your inventory. - Keep your focus on those products that are seasonal and mark them down for discounts so that your overall margins are not affected. #### **Use predictive analysis** - They are a point of sale software, and these predictive tools tell about the purchase a customer is going to make in the future and the stock in demand. - They help you in managing your inventory and pricing of products. # **4 Negative Effects of Discounting** #### **Frequent discounts** Do not offer discounts frequently as it will eliminate the urgency of buying a product from your customer’s mind. #### **High discounts on premium products** If you keep premium and expensive products on discount, do not give a straight discount of 50% as the customer may doubt its quality. #### **Discounts without reason** It would help if you did not offer a discount without any reason as the customers might feel that you are not making any profit or your brand is not working. Some reasons for discounts can be a festive season, seasonal discount, promotional discounts, etc. Pricing is a fundamental strategy in the growth of your brand, and if you want to earn profit from discounting, you must follow a strategic approach. Match your goals with the right type of strategic discounting to deal with common challenges easily, and the results would be sales and revenue-oriented.