Discounts – A Quick Guide

Shopping is fast overtaking cricket as India’s favorite pastime. And the high points of the experience seems to be sales and discounts. What are the kind of promotions available to the marketer?

Promotions is a scientific discipline and knowledge of what is the marketing objective and consumer benefit of each type will be invaluable to you as a marketer and a consumer, so here’s a quick refresher.

But before we get into the details, do remember that the best marketers discount the product in a way that there is value to the customer and a spike is sales, but the product’s brand image and appeal do not diminish.

Sales must be either predictable or completely random. Otherwise customers will postpone purchases waiting for a sale.

1. The Free Gift

You get, say, a free mug with your coffee. Or a gold coin when you buy a car. No strings attached, it is a sweetener by bundling a second product with the primary one. You can use this simple method:

- to add value to the product without dropping the price
– to get rid of slow-moving stock
– to link it to a festival and make it topical eg a gold coin for Dhan Teras
– to make it impossible for you to compare their product with a competitor e.g. a phone retailer offers you free airtime spread over 6 months whereas the other offers you a gold coin immediately on purchase

It’s important to vary your offers and to state them up front – for example, in certain silk and jewellery shops they have been handing out branded duffel bags at their discretion for years to big customers to the point that customers have started demanding it as their right.

2. Bundling

Creating a ‘bundle’ of goods. This usually has a couple of very attractive items and a few not-so-attractive items. The total price is usually lesser than the cost of the individual items. But not always – clever marketers can invest in gift wrapping and presentation which can result in the bundle being priced higher than the sum of the individual items. Common examples are festival gift hampers, ‘home starter kits’, wedding gift selections, white goods combos.

This promotion also ensures that you cannot compare the price of the individual items with a competitor.

3. Price discounts

Price drops are the best value for the consumer, though not so good for the marketer. They lower the value of the merchandize and also change buyer behaviour. Thrifty shoppers postpone their purchases till the next sale. On the plus side, if the sale is only an annual affair, you could generate 2 or more months’ revenue in just a single day. And with the right timing, you can change shopping patterns of customers to be in your favour.

In the US some sales have become iconic with people waiting outside for hours for the stores to open. India also has some famous sales – Vivek’s and VGP have had them for nearly 30 years, and the Big Bazaar Independence Sale has been gaining ground. The new kids on the block – the online sales by biggies like Amazon, Flipkart, Jabong and Snapdeal are now becoming an annual affair delivering a huge spike in purchases.

Sales are rapidly becoming the only time to buy discretionary goods for customers, and it is now hardship to wait because there are so many of them. Marketers have responded by hiking the MRP and then slashing it but it is a matter of time before customers catch on to this.

4. Twofer

There are many varieties of this – 2 for 1 or 3 for 2 or 5 for 3 etc. This is a good way for marketers to offer additional value to consumers without dropping the price. It results in piling up stock with the consumers but helps the marketers in meeting short-term sales targets. Works best when it is a low value consumable (like soap or soft drinks) or something that can be split for gifting (like perfumes or chocolate boxes).

5. More %

A variation of a twofer is x% more ie say 20% more shampoo at the same price. Since it is in the same container the extra value is not as obvious to the consumer as it would be if the additional amount was in a separate unit.

6. Coupons

Not a traditional Indian sales tool, it is starting to gain popularity. Mostly in the form of vouchers and online codes. This helps marketers to reward loyalty and drive repeat sales. There also sites dedicated to distributing and aggregating coupons which are making this format easier to consume.

7. Cashback

Tying up credit cars or wallets to give back cash to your buyers is a neat form of discounting. The consumer likes it because it is ‘cash’ and it is cheaper for marketers because you may be able to partner with the financial firm to share the cost of the discount.

8. Financing

Also a subtle form of cash discounting. For higher priced items a subsidized instalment scheme can be a better option than a flat discount because it helps to break up the payment into affordable chunks. The discount can include one or more instalments or a portion of the interest payment. Financing is popular in consumer goods, home improvements, housing, travel, jewellery, and more recently online marketplaces.

9. “Happy Hours”
Offers restricted to a specific time. Helps to smooth out transaction times or drive sales during off-peak eg “Monsoon Offer”. In both online and offline is used as a means to create excitement and temporary scarcity eg “Midnight sale”, “offer opens at 8am”, “flash sale price for 15 minutes” etc To ensure success it is important that the sale price is revoked promptly at the end of the stipulated time as otherwise customers will not continue to value the offer and change their behaviour to benefit from it.

Image courtesy of [digitalart] at FreeDigitalPhotos.net

About the author  ⁄ Jessie Paul

Jessie Paul

Jessie Paul is the Founder and CEO of Paul Writer, a firm she founded in early 2010 to raise the bar for marketing in India. Previously, as Chief Marketing Officer of Wipro’s IT business and as Global Brand Manager at Infosys, Jessie has been recognized for her contribution towards putting the Indian IT industry on the global map. With over 18 years in services marketing, including a stint with Ogilvy & Mather Advertising, Jessie is considered an expert in brand globalization and has been named one of the most influential business women in the Indian IT industry.

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