In the world of the small business owner one often thinks that if you reduce the price of a product you are reducing your profit and of course that is correct. But that is the short term view of reducing the price of a sale item.
The Long Term View To Price Reductions
If you are in business for the long term you have to think in both the short term and the long term. The long term happens when you have been able to stay in business for a number of years and keep growing your client base and your sales turnover.
At this point you might wander why then, would you want to reduce the sales price of a product unless it is a product that you want to get rid of due to lack of sales.
This then begs the question, “If the product has not sold before, why would it sell now?” After all not all sales are price generated.
Long Term Customer Sales
So to sum this up, if you offer as your special an item that has not been selling anyway then you will not be attracting buying customers. The idea would be to have that item near the counter as a ‘special’ special but not the one that you promote.
The purpose of a sale is to bring in new customers and bring existing customers back, so you should have a new product or at least a popular product and special it with the intention of customers picking up other items while they are in store.
Assessing Why You Reduce Product Prices
To make this more real to you, just think of your local chain store. It does not matter whether it is a food store, a hardware store or a clothing store. Why do you think they continually run specials?
That’s right, to keep customers coming in the store!
If they did not run specials they would really struggle to get new customers in to their stores and in fact even the past customers may not bother to come back either.
What they do is run shop specials or sales leaders that will bring customers through their doors then it is up to the sales people to generate more sales. Also by running regular specials customers tend to make it a habit to check out the specials that the shop is running and if the shop management is savvy they will have a system in place to get email addresses so they can advise clients of future sales and even offer online specials.
This then harks back to product pricing. You need to make sure that when you price your product there is enough room for a reduction for a sale promotion but still give you a small profit.
When I had my food store, which was a franchise store, we were told our weekly special items and quite often it meant that the item that was the ‘sales leader’ was actually being sold at a slight loss. The price had to be attractive enough to bring in the buyers.
My advice is not to get hung up on the price of each sale but rather that the turn over is increasing although you do need to make sure that you are getting your pricing strategy right to cover costs and make a profit.
The point is that this technique of bringing customers to your business can be worked online or offline.
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