June 12, 2017
Discounts can boost your business.
They increase sales in a flash, drive traffic to your front end and expand your brand.
But they can hurt you as much as they help you.
If you aren’t strategic, you can lose more profit than your business can handle.
Make discounts count for your independent community pharmacy by avoiding these three discounting mistakes.
Offering front-end discounts without a plan is a profit pitfall.
Every time you lower prices, you lower your profit margin. So, that loss of margin has to serve a greater business purpose.
Achieve successful front-end discounts by developing specific goals and implementing discounts that accomplish those goals.
For example, if your goal is to attract new customers, you’ll know to discount items with broad appeal and market the discount more widely. If your goal is to retain customers, you’ll know to reward customers for purchasing regularly.
Create a comprehensive front-end discount plan that targets your goals before you start slashing prices.
Discounts can devalue your brand.
Consumers often associate price with quality, which means frequent discounts will diminish customer perception of your front-end products.
Frequent discounts also create an expectation in consumers. Once they become used to low prices, they’ll react negatively when prices return to normal. In fact, they’ll likely perceive the change as an increase in price.
These two problems are exacerbated when they occur together. From the customers’ point of view, the product loses value and becomes more expensive.
To avoid this, limit how often you offer front-end discounts. Based on your business goals, determine what discount frequency will benefit your pharmacy most. Monthly? Quarterly? Seasonally?
And, don’t forget to set time limits on your discounts. Limited-time discounts will not only help prevent brand devaluation but will also urge customers to buy now so they don’t miss out on the promotion.
As another strategy, restrict your front-end discounts to select groups of people. Making a discount exclusive prevents cheapening your brand and instead makes the selected customers feel privileged, which spurs purchases and fosters loyalty.
Not all discounts are equal.
If you’re discounting a best-selling product, you’re cutting precious profit from your business.
If you aren’t discounting overstock items, you’re losing revenue when those products expire.
For example, sunscreen has high demand in the summer and low demand in the fall. So, don’t discount sunscreen during peak summer months because your customers will already be purchasing it. When summer ends and you have excess sunscreen in stock, discount it to move the excess off the shelf.
Also, you shouldn’t discount low-margin items unless they serve another business purpose, such as generating traffic to your pharmacy. Otherwise, you may end up losing money on them.
So, before discounting, understand which items work best to meet your discounting goals.
Make sure discounts benefit your business by avoiding these common discounting mistakes.
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