Using temporary price reduction to drive sales – Retailers and brands alike have become adept at using coupons, two-for-one offers, and other promotions to drive sales growth. A popular strategy among these is temporary price reduction (TPR).
Pros and cons of TPR have been extensively covered in marketing literature. While TPR can increase customer traffic, its costs often take their toll on company profits.
Increased Traffic
Most retailers utilize promotions in order to drive foot traffic into their stores, whether that means investing in loyalty programs, shopping experiences, or new products. TPR’s are an easy and cost effective way to do just this – consumers have been trained to look out for deals and will prioritize brands offering TPRs over those that do not.
Temporary price reductions can drive significant traffic and sales increases when they’re effectively promoted. To maximize results, customers must understand why and for how long a promotion exists so they can make an informed decision when purchasing goods and services from your business.
If your product or service is struggling to sell, a temporary price reduction (TPR) could help increase traffic and draw new customers in – though its successful implementation requires careful marketing so as to not alienate existing clients while simultaneously discouraging potential ones from purchasing the product or service. TPRs can also be an excellent way of increasing sales for specific categories of products that could use some extra attention from consumers; especially new products not yet fully established on the market.
Increased Brand Awareness
Pricing is one of the cornerstones of marketing. That is why retailers and manufacturers utilize sales promotions – including temporary price reductions – as an effective strategy to build brand recognition, foster trial of new products or services, increase consumption or simply meet short-term revenue goals.
TPR can increase customer traffic to your product, helping reduce inventory levels and increase reorder rates. TPR can also be used to revitalize stagnant pass-through volumes (the number of units sold to customers who actually purchase them), helping boost sales growth.
TPR can also be an invaluable way to build brand recognition if your competition does not employ this strategy. Consumers have become conditioned to hunt down discounts or sales incentives when shopping, which will make them more likely to give a product with such incentives a try than ones without them.
TPR may come with some drawbacks. First, it could have an adverse impact on company profits; when prices are reduced to increase sales volume quickly but at lower margins per unit sold. Second, TPR can erode brand loyalty – particularly among premium brands that focus on providing quality goods or services and expect their consumers to pay top dollar for them.
Increased Loyalty
Companies can leverage temporary price reductions to develop customer loyalty and increase customer retention, while sales promotions provide short-term revenue that may be necessary for cash flow purposes or funding growth initiatives.
However, this type of promotion can have its drawbacks if used too frequently. First and foremost is how often the promotional strategy can take its toll on company profits; for instance if an average profit margin for each product is 50% but they lower prices temporarily to drive traffic then 25% could be lost in overall profit. Furthermore, offering discounts for premium products could damage brand image and decrease customer loyalty significantly.
Due to their strategic alignment, sales promotions must be designed carefully in order to bring about long-term benefits while simultaneously yielding short-term gains in sales. Otherwise, these efforts may bring immediate but fleeting benefits but no long-term traction with customers or increased long-term profitability.
Increased Sales
Temporary price reduction is an effective strategy to draw customers and drive sales. Brands and retailers alike often use temporary price cuts as part of their short-term strategies to stimulate consumer demand and boost product sales quickly. But excessive discounting could damage brand equity and shorten long-term growth potential.
Temporary pricing takes many forms, from cents-off promotions to multi buy promotions. Walmart calls their temporary pricing offers Roll Backs; you may even encounter them as coupons redeemable against purchases or free items with each order.
Retail partners expect their suppliers to offer discounts regularly as part of promotional activities and to encourage shoppers to try new products, ultimately building loyalty among consumers and increasing sales and market share. It plays a pivotal role in business-to-business supply chains and contributes to driving sales growth and market share gains.
Make the most out of temporary price reductions by measuring their results through increased market share and sales, as well as whether they fit well with your brand and customer expectations. Otherwise, customers could become confused over why your prices have been discounted, possibly losing trust in regular pricing altogether if that discounting were to continue – to prevent this, be clear and honest when explaining why a sale is taking place.
