Discounting, But Only To The People That Really Value Discounts

May 20, 2016

 

An example of how one vendor increases sales by selectively discounting to customers most focussed on price and least likely to buy without a discount.

 

Assuming that a business makes enough money to cover their fixed and variable costs it is worth looking at discounting to activate new customers, customers that would not buy at full price. You wouldn't want every sale to go through at the smaller discounted price, but if the discount generates new sales in addition to your full price sales it can mean additional profit.

The challenge is to avoid cannibalizing your full price sales. How do you discount to some customers (the price-sensitive customers that will only buy at the lower discounted price) but not the ones that are prepared to pay full price?

One option is a hurdle – some obstacle that the customer has to jump over before they can get the discount. If a hurdle is well constructed only those customers that really want the discount will make the effort, the others will pay full price.

Another option is to use a kind of profiling, affiliation or demographic factor. For example students, senior citizens and auto club members are all considered to be price sensitive which is why you often see discounts for members of those groups.

Above we see a promotion that employees elements of both – discounted movie tickets for sale at Costco.

There is a hurdle because you have to buy the voucher in advance and then sit on it until you actually go to the movie, or present it is a gift. That means some planning and foresight, as well as tying up some cash. If you're prepared to do that, if you're willing to jump that hurdle, you earn the discount.

It also targets Costco members who are very likely to be price sensitive. By choosing to have a Costco membership they have indicated that they are serious about saving money.

 

What It Means For Retail Florists

How can florists use this kind of model to increase their sales?

When it comes to hurdles one of the best is advance ordering. For example discounts on Valentine's Day or Mother's Day orders that are placed well in advance. The kind of person that takes advantage of that is likely to be someone that is sensitive to price.

Many florists also offer student, senior and even auto club discounts. Again this isn't because they're being nice, it's because they recognize that these customers are most likely to be sensitive to price and unlikely to buy without a discount. Some florists even add Coscto membership to that list – offering discounts to Coscto members.



Tags: Hurdles
Category: Examples

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Cheap Tuesdays – A Great Self-Propagating Hurdle

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