It seems like a no-brainer to hold an End Of Financial Year (EOFY) sale. Everyone is doing it and you want to increase sales and pull in more clients and customers. The problem is, having a sale isn’t always the answer. In fact, it could often do more harm to your bottom line than good, in the long run. Here’s why:
Sales attract price-sensitive customers
Sales might temporarily boost your bottom line with a higher number of purchases (at a lower price), but it’s almost always temporary. Those sale shoppers often aren’t turning into full-price shoppers after the fact.
Few are the sale-shopping customers who are willing to pay full price for products or services in the long term. The price-sensitive customer or comparison shopper will wait until something is on sale, and buy several of them, foregoing purchases in between, which could corner you in a pricing strategy where you’re always having a sale. You know plenty of brands who have gotten stuck in the constant sale cycle. If pricing strategy is to appeal to bargain hunters, this strategy is fine. But it doesn’t work for most businesses and you’ll want to work your hardest to stay out of it.
The solution?
First and foremost create a unique, authentic brand offering something of real value that’s hard to comparison shop. If you can achieve that, you can successfully incorporate a sale strategy into your pricing strategy by:
Only having an annual or semi-annual sale on a strict schedule
If customers know you only do a short, annual sale as a bit of a thank you or bonus, they are less likely to wait a full year to top up products or services. It would be impossible if the product or service is something that they use regularly, for example a face cream that needs replacing every month, a facial, manicure or leg wax.
Only discounting specific items like dead stock
Don’t discount your entire inventory. If the only items on sale are dead stock, treatments from older devices (say an Emsculpt treatment versus an Emscult NEO treatment) or less-premium versions of a service, there’s less risk people will wait to purchase the newer or more popular items. And you get the added bonus of clearing your dead stock from shelves while still making revenue.
Only offering the discount in tandem with a full-price purchase, something akin to a loss-leader strategy or things like bundle pricing
Treat the discount as an add-on/GWP/bonus to a full-price purchase. Buy one full-priced treatment, get the second 50% off. Buy this serum and get a cleanser free.
What are the scenarios in which I should have an EOFY?
- You have dead stock and need to make way for next year’s inventory. Dead stock is a killer for any business. Make room for new SKUs with an EOFY sale.
- You are selling an add-on product or service. If there’s, say, an add-on, like an LED treatment after a facial, that you think will add value to the service, introduce customers to a new treatment option, and it has little to no marginal cost for you to do it, then sell it as a sale. Book a facial and get a free LED treatment after, valued at X.
- It’s a one-off or exclusive partnership. If you have a limited-edition product that you want to shift, mark it down. Customers can’t wait for it to go on sale again if it’s only available once.
Generally your regular pricing should be in line with the market, give or take some based on your exclusivity and value, since customers and clients can easily comparison shop now. But you certainly don’t have to follow the pack when it comes to discounting products and services. Make sure that if you’re holding an EOFY sale this year, that it’s not just for the sake of having a sale. Make it fit into a logical pricing strategy that works for your brand. And if it doesn’t? Don’t do it.
—
Read the current issue of our digital magazine here:
For more news and updates, subscribe to our weekly newsletter.
—
Have an idea for a story or want to see a topic covered on our site and in our pages? Get in touch at info@professionalbeauty.com.au.