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Welcome to the Business Insights Newsletter

Effective Retail Promotions

September 7th, 2009

Category: Retail Business Tips

Retail Promotions that Increase Revenue

Retail Promotions that Increase Revenue

Retailing is always tough and even though the economy is picking up, it is always important to maximize sales.

We have previously discussed the benefits of customer loyalty programs but in this article we will focus on attracting additional customers into the store.

One historical favourite with many retailers for generating additional revenue has been the percent off sale.

The trouble is that retailing is so competitive now that it seems that there is a sale on almost every week, so this type of sale does not work as effectively as it used to. And this type of promotion substantially reduces margins without necessarily increasing turnover enough to cover the lost margin. The net effect can be reduced total profit during sale time, rather than the increase  that you were expecting.

Here is a list of modern retail promotion ideas that are designed to not only increase turnover, but to increase profit as well. None of these ideas is completely original, but you may find the list useful for when you are planning your next promotion. The examples are for a sports store, but they could be for any type of retailer.

1.    X percent off second item. Example: buy one pair of runners (at list price) and get a second pair at 50 percent off. Not only does this appear to be a better offer than the 25 percent off which it is equivalent to, but assuming your “normal” margin is at least 50 percent, then this offer is guaranteed to get at least the same amount of profit per sale as without the promotion, but the turnover should increase substantially with the promotion, thus substantially increasing profits

2.    3 for 2. Example: 3 pair of sports socks for the price of 2. Again this promotion looks better than the equivalent 33 percent off. And with some price support from the relevant supplier, can be great for increasing brand awareness, turnover and profit.

3.    Bonus item. Example: buy a new bicycle and get a free helmet from a specified range. This is again better than a flat discount as you are not sacrificing turnover. And depending on the quality, etc. of the bonus item, often the customer can be upgraded to a better quality item, complete with a healthy margin.

4.    Package deal.  Example: golf clubs, bag and buggy for $$$. Often once the customer is attracted into the store by the advertised package, they can be upgraded to an alternate “package” at higher margins. And even if they take the promoted package, the profit from the deal is higher than if the customer only bought one component of the package at the regular price.

5.    Bonus coupon. For example, buy any pair of runners and get $20 off your next purchase. This has the great advantage that the customer has to come back to the store at a later date to take advantage of the discount. So the one promotion has actually generated two sales.

CONTROL includes facilities to create and manage all these types of promotion. Please contact me at Bernie@creativecomputing.com.au for more information about promotions and how they can be easily implemented in your retail business.