All retailers should know how to hold a sale since promotions and discounts are easily one of the best ways to boost your bottom line. It creates a sense of urgency amongst consumers, and also helps to introduce your brand to new customers who haven’t encountered you before.
However, sale events can also reduce your profit margins and may attract opportunistic buyers, rather than rewarding the loyal customers who shop with you during regular times. This is especially challenging during the downturn caused by the pandemic; consumers are a lot more price-conscious at present as a result of an uncertain economy, meaning that sales are sometimes necessary to create a buzz and get people spending.
So, how can you avoid this double-edged sword as a retailer? See the 8 tips below to find out how to hold a sale without killing your profits.
1. Think about how to pivot your brand messaging
COVID-19 has caused a massive shift in consumer spending habits. Due to working/schooling from home and our social lives being upended, many of our fundamental needs have changed. This means that the products that consumers prioritized in the past may be very different from what they are interested in now.
As a retailer, your sales strategy needs to consider this. It’s important to be sensitive both to how consumers are feeling at this time and the new challenges they are facing. The brand messaging that underpins your sale should aim to alleviate common stresses and anxieties, rather than making it look as though you are there to profit.
Nespresso is one brand that has cleverly tweaked its messaging during the pandemic. Rather than promoting the quality of the coffee itself, they are focusing on how easily their coffee ritual can be integrated into the lives of busy parents.
This shows great appreciation for and understanding of customers who are having to juggle parenting with working from home, which creates a strong backdrop for sales or promotions, such as this conditional offer for new customers:
When combined with new messaging, this high-value deal offers consumers a way to simplify their home lives and still enjoy the great cup of coffee — a compelling story during the pandemic.
2. Consider implementing a loyalty program
The so-called ‘80/20 rule’ is commonly repeated by retail experts as an effective strategy to increase your profits. This is to say that roughly 20% of your customer base are responsible for 80% of your overall sales.
During the pandemic, these are the customers that you can rely on most to support your efforts. By adding some new initiatives dedicated to this group, you stand to gain even more traction during your sales.
Setting up a loyalty program sounds intimidating to many retailers, but you can keep it really simple and still gain a lot of mileage, especially during sales. For example, you can ordinarily keep your program one point earned for every dollar, but upping this to double or even triple points during sale periods adds a great incentive to spend.
Loyalty programs are also a great reward for your most loyal supporters, who deserve recognition especially during tough economic times.
3. Use pricing psychology to your advantage
Pricing psychology is used by every retailer in some form. Most consumers are fully aware of this practice, but it nonetheless makes a huge difference to our sales figures.
Why? Because pricing psychology takes advantage of how we calculate value.
For example, so-called ‘charm pricing’ is widely used because our brain is trained to focus on the left-most digit. So, if something is priced at $19.99 as opposed to $20, we process this so quickly that we’re already thinking of the item as being $19 before we’ve finished reading it.
This technique is great for sale events, especially when you are using promotional signage in-store or on your website. Playing around with graphics and sizing (as seen below) also helps to maximize the perceived value of your deals:
Image credit: nicckolenda
As the example above shows, putting the cent value in a smaller font size puts the visual focus on the left-hand number, which is far more appealing to the price-conscious consumer. In fact, charm pricing can double your conversion rate!
Techniques like these will help you to attract price-conscious consumers and enhance your promotions.
4. Using conditional offers and spending thresholds
Discounts like ‘50% off clearance!’ are very appealing to consumers, but they don’t always work for businesses in the long-term.
Why? Because it doesn’t encourage customers to browse outside of the clearance section in-store or on your website. It rewards ‘deal-hunters’ rather than loyal shoppers who support your brand.
Moreover, when retail spending has become tighter due to COVID-19, consumers are more likely to ‘wait it out’ to see whether a certain product on clearance might receive a further discount – and that directly impacts the profitability of your sale.
Instead, try using conditional promotions. They allow you to offer both an attractive discount and entice consumers to spend more to get a better deal.
Promotions such as ‘Spend $100 and get 20% off’ will light a fire under your customers. They promise a high level of value and encourage browsing your store more widely. As well as driving up transaction values, this also introduces your customer to new product lines for future sales.
Conditional offers can be made much more tangible, such as including a gift with purchase or discount off a specific item. Sephora is a real expert at this (as seen below)— they provide a range of online promotions that change weekly:
Sephora empowers consumers with choice by offering a range of conditional offers at different price points, as well as deals that require purchases from certain brands. Along with increasing the perceived value of each sale, it encourages customers to regularly check the store for the latest deals.
Another bonus? This tactic introduces customers to new products outside of their regular purchases. There is always a chance this new product becomes a favorite and creates a repeat buyer.
5. Having a more flexible return/exchange policy
Your returns policy is going to carry even more weight during COVID-19; if stores are having to go through closures due to lockdown restrictions, this can greatly complicate the returns process. Many consumers are also being more cautious with their spending, and want to minimize their trips into stores or post offices as much as possible.
No matter how good your sale prices are, a flexible returns policy is a must to entice shoppers in the current climate.
For example, lengthening your returns window is an easy way to bolster consumer confidence. Many big retailers use this strategy, including Target, Sephora, and H&M, but it works just as well for smaller stores.
Moreover, 73% of shoppers say that the overall returns experience at a retailer will impact their likelihood to purchase from again. So, aside from increasing sales in the short term, a policy that is fit for the times we are in will also help to encourage repeat purchases.
To that end, implement simple and flexible processes for returns. A good strategy is to allow customers to return online purchases in-store. Aside from providing a good experience, this practice can also lead to incremental sales. With the right in-store merchandising and marketing initiatives, you could turn these “return trips” into sales opportunities.
6. Personalizing your discounts
Personalization is one of the big buzzwords within retail, and with good reason. It makes your customers feel special, which ultimately increases conversions.
Robust customer data is the key to creating personalized discounts. A strong history of your customers’ shopping habits will help you put together attractive promotions targeted at specific customer segments, which you can send out via email.
For example, free shipping is a very popular perk, especially during COVID-19 when people are less likely to shop in person. However, other customers might be more enticed by an actual percentage discount. Knowing who these groups are will help you to create much more tailored promotions with a higher success rate.
7. Cross-sell as much as possible
Cross-selling is a highly effective sales strategy and can be used to boost transaction values in both online and offline settings. However, you need to make sure that you implement it correctly to see success during sales:
Train your staff in the latest product knowledge. Cross-selling will fail if you are unable to convince a customer why a specific add-on is going to benefit them. Your in-store sales associates will feel much more confident when cross-selling if they have strong knowledge in the items you stock. Consider making suggestions of product pairings that could work well to both your employees and customers.
Think about how best to merchandise your products. For products that consumers are more likely to buy together, grouping these products in displays within your store. For example, there’s a clear reason why cosmetics brands will display lip-liners together with lipsticks – lip-liners are an easy add-on for their sales staff to promote!
Offer online recommendations. Cross-selling can be big business in eCommerce – Amazon’s “customers who bought this item also bought” suggestions are responsible for as much as 35 percent of their revenue! Lush also uses a simple but informative cross-selling technique by listing which items are top sellers with the ‘Lushies’ (as seen below):
With its very dedicated fanbase, recommendations from the Lush community carry a lot of weight with their customers, which makes it a clever way for the brand to boost sales.
8. Stay on top of retail execution
Even the most brilliant sales and marketing concepts will fall flat if they aren’t implemented properly. In order for your efforts to be effective, you need to ensure that your ideas are brought to life in-store in the best way possible.
Whatever sales strategy you choose, make sure you execute your promotions on time and across all stores. Use a retail inspection app like Bindy to send tasks, create customized merchandising checklists, and request inspections and photos. This way, you can be certain your sales strategy is executed in full across all locations.
Holding discounts or promotions during COVID-19 can be a tricky decision for some retailers, but there is a lot to be gained by utilizing sales strategies that maximize opportunities for customers to spend. By using the tips outlined above, you can benefit from creative tactics that don’t cut into your profits.
Francesca Nicasio is retail expert, B2B content strategist, and LinkedIn TopVoice. She writes about trends, tips, and best practices that enable retailers to increase sales and serve customers better. She’s also the author of Retail Survival of the Fittest, a free eBook to help retailers future-proof their stores.