How To Retain Profit While Running Discount Sales

How To Retain Profit While Running Discount Sales

Discounts and promotions are one of the most common, and arguably, most effective approaches for increasing retail sales. For example, Black Friday and Christmas sales help make the holiday season the busiest season of the year. Lots of businesses leverage the power of discounts to drive up sales at strategic periods during the year.

However, as effective as they are, discounts can be a double-edged sword. While slashing price certainly attracts customers, if done incorrectly, you can hurt your business by losing money or even overwhelm your staff and inventory. 

If you are looking to run sales or discounts at your store, it is necessary to plan your promotions well and create well-thought-out offers to match your objectives. Go through the suggestions below on how to implement discounts correctly. 

1.Define your Objective

Hastily implementing discounts is one of the biggest mistakes you can make as a retailer. Before you run any discounts, see that you have a clearly defined objective. Some of the goals behind running discount offers include:

  • Acquiring new customers with low priced offers.
  • Increase product demand by offering a lower price. 
  • Increasing sales.
  • Reengaging existing customers and generate repeat business.
  • To cut losses and get rid of old stock.

2. Test Different Discount Tactics

The objectives above calls for different tactics. To increase sales, you will need to know how low you can discount your product without falling into unprofitable sales margins. But to cut inventory losses, you do not worry so much about attracting new customers. You will want to gauge the profit margin effects of your discount against the cost of acquiring new customers. For existing customers, you will want to weigh profit margin losses against customers’ lifetime value.

Ultimately the right discount methods will vary per business, products, and customers. The best way to figure it all out is by implementing various tactics and see what works best for your business. Some of these discounting tactics include:

  • Bundled Discount.
  • Buy one get one free.
  • Conditional promos.
  • Seasonal discounts.
  • Free shipping.

What matters with these tactics is the initial impression of what sounds like a good deal.

3. Make Sure the Timing is Right

When it comes to offering discounts, timing is just as important as relevance. Creating and marketing deals when customers need them most will hugely increase your conversion rate. Paying attention to your customers’ spending habits and when they spend the most will have you sure of when to run promos. For example, if you have customers who buy at the end of the month, it is smart to schedule your offers around that time. 

4. Segment Shoppers and Tailor Offers Accordingly

You can maintain your profit margin by segmenting your shoppers and tailoring your offers accordingly. For example, you can offer discounts to first-time customers rather than repeat customers. Use this to increase the chances of luring new sales without losing out on sales margin. Or you can segment shoppers by setting up profiles using your point of sales (POS) system to outline their shopping habits and use these habits to determine the kind of discounts to offer each shopper. If you use the ICG software, make use of the customer management system in your POS system to check, view, sort, and group shoppers according to factors like purchase history, transaction balance, and location. Learn More.

5. Be Mindful of Your Margins

A discount can risk you cutting far into your profit margin. To ensure that does not happen, you have to set an acceptable range of margin for your products. You can sit with your accountant to help you crunch these numbers or find a template online. Your breakeven point, breakeven units, and breakeven price reveal how many sales you need to make at a given price to stay profitable. To keep your margin healthy, you need to reduce your marketing cost. For instance:

  • Market discounts to customers you are already in touch with – your existing customers, email lists, social media followers.
  • Increase sales activity by comparing how many sales you would need at your current margin with how many you would need at your discounted margin, then increase marketing activity proportionately.
  • Promote discounts but not at the expense of your profits
  • When spending to attract customers, compute your projected profit from the discount offers, and account for these marketing expenses.
  • Increase revenue per discounted transaction by bundling discounted items with full-priced items or selling full-priced up-sells.

6. Promote Upselling and Cross-selling

Discounts typically drive more people to your store, so take advantage of this by upselling and cross-selling. Encourage your employees to suggest products or upgrades to customers shopping around in your store. Carefully consider the items you have put up on sale, then come up with possible product recommendations in advance, so your employees know what to recommend to a customer. You can also create displays that can upsell and cross-sell for you. For example, you can set up a mannequin wearing a well-coordinated outfit featuring that suit that is on sale so customers will have a better idea of what they could buy together with their jacket. 


In conclusion,

Discounting can be a great way to bring in new customers, reward loyal customers, and move a lot of inventory in a short time. The good news is you do not have to lose money or hurt your brand when you offer discounts. You need to have a creative and well-thought-out strategy with clear objectives to increase sales and attract the right type of customer.