Time to get creative.
Test, test, test
A few months back, demand was an issue; now many retailers are facing ballooning stock. For consumers, this may provide a relief valve, presenting them with that appealing word: DISCOUNTS! According to Jeff Gennette, Macy’s CEO, “Customers are about to get some amazing deals on products that were hot during the pandemic.” But for retailers, this is a source of anxiety as they are left questioning if ballooning stock and subsequent discounts will lead to overall sales losses or gains.
Reasons for discounts are often three-fold. First, to draw more customers to the product or site and thereby increase overall sales. When done well, discounts can lead to significant sales gains. Software Advice found that 99% of retailers apply a discount pricing strategy because “Everybody wants a bargain.”
Second, to create a positive customer experience with the brand. One study by Paul Zak from Claremont University, found that oxytocin levels in the brain increased when consumers used discounts. Applying discounts is therefore a sure-fire way to help consumers feel the love for your brand.
Third, to avoid complete losses with overstocked supply. Recouping some money and avoiding waste is always a better option than having to discard unsold products.
Time to get creative
In the movie, The Incredibles, the villain Syndrome claims that “When everyone is special, then no one is.” In essence, he is suggesting that when incredible becomes normal, a new normal is needed to be incredible. While basing your discount strategy on a Disney villain’s philosophy may not be the best rule of thumb, there is value in working to stand out from the competition in remarkable ways.
Amazon did this when they seized on the concept of Christmas in July and began offering a mid-year Prime Day for its prime members with discounts across a huge swath of its product offerings. To compete, Walmart followed suit.
With inevitable discounts looming, generating your own mid-year “Black Friday” discount weekend could shift the messaging from the doom-and-gloom of inflation, war, and pandemic woes to more celebratory messaging. And what is it being celebrated? The discounts, themselves, of course.
That said, another strategy may be to seize on inflation psychology and use that to spark interest in the discounts. Consumers love a good deal, but they also love to be part of social movements that effect change. When buying discounted products over high-priced products, consumers help keep prices low, resulting in a counter-balanced inflation effect. You can attract discount attention by emphasizing to consumers how purchasing discounted items can be part of the inflation solution.
Test, Test, Test
The biggest challenge with creativity is knowing whether your innovative ideas will succeed or flop. The discount strategies above are great in theory but may not succeed in practice, meaning that the best way to ensure their success is to test them beforehand. Testing promotions helps you know definitively what the sales lift (or lack of sales lift) will be.
Additionally, while there is clearly a need to discount overstocked items, applying discounts to other high-demand items can also draw customers in. But knowing exactly which items are best to discount – and how discounting those items may affect other sales – can be elucidated through testing.
In this climate of supply chain fluctuations and consequential change, getting creative with discount strategies can help catch your consumers’ attention and generate a positive connection to your brand. And testing those strategies will help back those creative ideas by providing statistical proof.
If you’d like to learn more about how inflation, inventory management, pricing, or how testing empowers remarkable outcomes, read these articles:
Can A/B testing on pricing help bandage the inflation bleed?
Managing inventory: from too little toilet paper to too many televisions.
Actionable insights: taking test and learn to the next level
Testing to thrive in today’s retail landscape