A promotional pricing definition or a promotional discount definition covers a wide range of promotional pricing tactics, including:
Buy One, Get One Free (BOGOF). To celebrate Youth Soccer Month, Chipotle customers who wore a youth soccer jersey could “score” a free appetizer or meal for purchase or free over Labor Day weekend.
Coupons. A coupon is a coupon giving the holder the right to a jacamo discount code for a particular product. The researchers found that the average cart abandonment rate is almost 70% .
Flash sales. For a very short time – sometimes just a few hours – brands will lower their prices to offload excess inventory, acquire customers, or increase profits. Travel brand Globus increased flash sales success by 20% by offering personalized promotions to military personnel. The company’s personalized promotion strategy reduced coupon abuse by 35% and spent 75% less effort and resources.
Loyalty programs. A loyalty program is a rewards program that a business offers to its customers who make frequent purchases. Since it costs five to 25 times more to acquire a new customer than to keep an existing one , loyalty programs are a popular type of price promotion. The Virgin Atlantic Flying Club allows members to earn points that take them to different levels. The higher the level, the greater the benefits.
Seasonal connections. Certain times of the year, such as Black Friday, Cyber Monday, or Veterans Day, are ideal for promotional rates. US News & World Report has a buyer’s guide on the best months to find the best deals.
Segment specific promotions. An example of effective promotional pricing targets certain buyer segments, such as students, teachers, seniors, or the military. Caribbean , a travel company that offers low-cost luxury vacation packages to the Caribbean, Mexico and Central America, offers personalized promotions that are closed to nurses. When the brand launched its first nursing program, it recruited 8,000 36 new nurses to its travel club and reduced fraud by XNUMX%.
How to calculate the best promotional price for your business
To avoid devaluing their brand, marketers should assess the feasibility of a discount and the length of the offer before setting a promotional price.
The type of business.
Is there the capacity to withstand a huge spike in activity? Do the promo code match your brand’s position? If you’re a high-end brand like Apple, you only release certain products at certain times of the year, like laptops during back to school. If you are a value brand like Kohl’s, a rebate strategy could be one of your brand’s main attributes.
Branding. Would offering a large discount hurt the brand?
How do the numbers add up? Eight critical calculations include:
- Incremental cost of sales (the percentage of actual cost for a new customer)
- The amount of the average sale
- Percentage of reimbursement
- Percentage of coupon users who are existing customers
- Number of coupons purchased by each customer
- Percentage of coupon customers who become repeat customers
- The advertising value of promoting the company to a large number of people
- The normal cost of acquiring a customer through advertising
Another key calculation is the repeat purchase rate of a newly acquired customer. Frequent discounts condition consumers of a brand to expect a reduced price that they eventually know will come. A promotional pricing strategy is only successful when it helps a brand acquire high-value, loyal customers who aren’t conditioned to expect discounts. The best promotions are selective, targeted and strategic.
Identity marketing and promotional prices
Identity marketing, a new form of personalized promotions, avoids the pitfalls of traditional promotional pricing. It’s not about attracting bargain hunters, which can squeeze margins and devalue a brand. Identity marketing takes a more targeted approach to reaching its audience. Brands use identity-based promotional offers to specifically engage high-value customers by appealing to their deep sense of belonging to a consumer tribe .
Here’s how identity marketing works:
A business creates a gated, personalized promotion for a tribe of consumers that aligns with its brand and invites prospects to take advantage of it through the usual channels of the business.
Consumers choose to take advantage of the offer and are digitally verified to make sure the consumer is eligible and to avoid discount abuse. Brands are using it zero-party data to drive ongoing customer loyalty.