Do discounts really get customers in the door?

Offering discounts on products or services can really boost your business, from attracting new foot traffic and ensuring customers stay loyal to encouraging buyers to spend more when they are in your store.

But while consumers love a bargain, if you offer big discounts too often, your services and products will become devalued. And offering unattractive discounts is a total waste of time and money.

So here's what you need to know about using discounts to your advantage.

Why do discounts work?

People love getting a good deal. Whether it’s money off or something for free, offering discounts and special deals has been around a long time in the service and retail industry because it works. Attractive discounts mean more people through the door and that means more potential buyers for other items in the store.

Always run your discount deals for a “limited-time only” so consumers feel the pressure to snap it up because they fear missing out or that another deal like it won't come up again.

What kind of discounts can I offer?

Dollar or percentage off is the most standard type of discount in retail, offering say $15 or 20 percent off the original price. Along with rebates on tires, they are pretty common in the tire business. Other discounts include free additional services — offering an “extra” with a purchase, such as “buy four tires, get a free oil change.” Buy one, get one usually means buy one product, get the second free, or it can be a percentage off a second item or service, such as “buy four tires, get 50 percent off a cooling system service.” Quantity discounts encourage the customer to buy more of a product such as “buy three tires, get the fourth free.”

Getting it right

If you’re going to offer discounts, you need to do your homework and develop a strategy for it to work for your business. Firstly, you need to consider why you are discounting. Is it because you need to attract more customers through the door or because you need to improve your sales margins?

Eric Gill of Gill’s Point S Tire and Auto Service stores says targeting your discounts where the rewards are needed most is important.
“At any given time you’ve got 10 percent of the population that need tires and most of that 10 percent don't even know they need tires,” he said. “I’ve never believed that discounting a set of tires in an ad is going to drive traffic. A traffic builder is ‘gear up for winter driving, get a 25-point safety inspection and windshield wipers for $10.99 this month only’.”

“It’s a good traffic builder because it’s cheap entry to play and they feel they are getting value — $10 bucks for a set of windshield wipers — and everyone should be getting a safety check. So now I'm talking to 50-60 percent of my audience instead of maybe 10 percent.”

If your margins are poor, Gill says, instead of straight discounting figure out how to feature a high-margin service into a special deal, such as giving away a half-price alignment with every set of full-price tires. If you’ve already got the traffic, then target your promotion around building margin.

What should you discount and how?

Whether you’re attracting new customers or selling more to existing ones, what’s important is giving them value. An offer like a straight 20 percent off a brand of tires doesn’t really mean much to the customer; they don’t really know what the regular price is and if the tires might still be cheaper someplace else. However getting a tangible benefit strikes a chord and is more likely to result in a sale.

Gill says frequently alternating discounts and employing a mix of offers, especially bundled offers, is key to successful discounting and, above all, making sure you are offering the customer real value and not underselling yourself.

“We are pretty good at mixing our discounts; we may be discounting a major tire model for a month at a time and then that will be switched. So if it’s a Goodyear tire, it’s a specific tire that will be discounted or on rebate for a period of time and then that won't be on discount or rebate for the rest of the year,” he said.

“I do believe in discounting, but I believe more in what I consider ‘value pricing’ and bundled offers, so we sell a lot of discounts in a form of ‘buy a premium set of tires, get an alignment free’. But we try to stick to our regular retail prices and so when there is a sale, it is a genuine sale, as opposed to something that’s on sale every month, so customers do feel like it is a true discount.”

Tagged: Marketing strategies

Do discounts really get customers in the door?