How Promotions Affect Sales

If you're a retailer, you already know that promotions are one of the most effective tool to lure customer. Whether it's the holiday season, launch of a new product or clearance of piled up stock, retailers never hesitate to put up their discount boards. These discounts and offers are often the result of the ' domino effect' as all the major sales come around at the same time. This method has proven to increase sales in short term, however the opinion changes for long term.

Customers love discounts! And the simple facts that prove this are the long queues and increased website traffics during sale period. E-commerce has played a major role in making pricing and promotion a successful tool for retailers. It has helped online as well as offline merchants in developing various strategies to attract shoppers and convey their messages more effectively. One such example is of newsletter, which help customers in being up to date regarding all the coming up sales, offer and discounts.

Let's understand as to how pricing and promotions affect sales.

Influencing the buying decision

When a customer wants to buy a product, they almost always do some research to get the best deal. 81% customers look for discounts whenever they are making any purchase. Also, offers and discounts are the top deciding factor for 75% customers when deciding what to buy and where to buy it from.

Encouraging the adoption of new brands

A customer is often reluctant to try a new brand because of the uncertainty that comes with it. Surely reviews help, but that is not enough. this is where offers can be helpful. A survey shows that every 4 out of 5 customer feel encouraged to try new product/brand if they find some offer or discount. This is the reason why every websites offers a special coupon for their first time users. This helps them to set up a loyal  customer base, as 91% customer who have used an offer will visit the same site again. For example many online food delivery apps offer special discount for first 5 orders placed by a new user.

Reducing cart abandonment

Cart abandonment is the most common barrier to sales. A customer comes to your website, adds to cart, but at the last moment seeing the final price they leave the page. Almost 77% of customers leave their orders in the cart. Imagine the amount of business these 77% customers could have generated! Coupons are the last chance for a retailer to convert these cart items into cash. As soon as a customer abandons the cart, a message pops up showing an offer they can redeem. Does this sound familiar?

Purchasing more products

Retailers often tend to give discounts only if the amount of the total purchase meets a certain amount. This pushes a customer to make some spontaneous purchases. For example, if the total value of customer's cart is £80 and they can only redeem the coupon on the total value £100, they tend to buy something to cross the £100 mark. A survey found that two-thirds of consumers have "made a purchase they weren't originally planning to make solely based on finding a coupon or discount".

Final thoughts

Pricing and promotion strategy should be used wisely by retailers. Timing and the value of the discount matters a lot. Footfall is usually high during holiday season. People go around looking for discounts. But it can get a bit tricky. A retailer who is always on heavy discounts might convey an inferior brand image.  If planned well, offers can increase the customer loyalty.