As business owners who've been around awhile know, a sale or a coupon can be the best thing ever for a company's finances—or the worst.
After all, so many things can go wrong. You could sell a bundle—then see no customers for weeks because they all came in when you were practically giving things away. Or you might attract a mob of new clients during the sale who never come back because they don't like your regular prices. Or maybe more customers than you expected use your latest coupon and you end up losing money on the deal.
So how can make your sale a success? Here are four things you should consider before throwing a sale.
1. Make Sure You're Going to at Least Break Even
That may sound like common sense, but you've got to work the numbers to make sure you'll come out on top when the sale is through. For instance, say you decide to offer a deep discount on a single product, assuming it'll act as a loss leader—a product or service priced below the competition, designed to bring in the customers, so they spend more on other offerings at your business.
But what if things go wrong and you end up selling dozens of that product—but nothing else—and you wind up losing money when all is said and done?
"Many times, business owners will discount products and services that have the smallest margin, making it tough to squeak out an initial profit," says Kevin Kowalke, founder of The Kowalke Group, a marketing firm in Milwaukee, Wisconsin. "Finding the right leading item that a consumer wants is what makes the offer effective."
2. Protect Yourself From Deal-Crazed Consumers
With extreme customers, there's no telling what might happen if you aren't careful. You could market a $50 coupon that anyone can use if they spend $100 or more. But if you don't restrict the number of coupons a customer can use, and customers can go crazy, stocking up on the deal.Â
Problems with sales or coupons can go beyond simply forgetting to add restrictions to a coupon. Technology can mess up a sale in all sorts of ways.
Brian Klotzman recently held a storewide sale for Organized Prepper LLC, his emergency and disaster preparation supply company in Lewisville, Texas, to celebrate having more than 10,000 Facebook followers. While the sale was ultimately a success, Klotzman says, "we did have several people who were able to double-dip, getting the special sales price, then using our cart abandonment coupon to get some low-margin products at below cost," Klotzman says. "Those few orders that we lost money on taught me a lesson."
3. Identify the Type of Customer You're Trying to Attract
For business owners, this is beyond tricky to do, but it doesn't mean it isn't worth the attempt. The way Dennis Duty sees it, "You get two types of customers—customers who are on the edge of buying your product and needed the final push, and customers who are impossibly cheap with impossibly high expectations."
Hint: You want the customers who just need that final push.
Duty owns CastleForge Media, which is based in the Greater Boston area. Duty, who has one full-time employee and one part-timer and who also uses several freelancers, teaches local businesses how to make their own videos.
During the first week of June, Duty held a week-long sale for his software and books, marking them off anywhere from 50 to 80 percent. In many ways, the sale was a huge success—he sold more books and software than he ever had since he started his company in March 2013.
But he vows to never do it again. The sale, Duty says, "resulted in the busiest customer support week ever. Between employee time, refund requests and complaints, I learned my lesson the hard way."
And what exactly was that lesson? "Customers who are willing to pay more understand the value your products bring," Duty says. "Customers who wait for discounts didn't want them to begin with."
While that might be a little harsh—at least it certainly isn't applicable to every business's customer base—Duty has a point. The most effective sale will introduce customers to your business or reward established patrons, and thus encourage them to come back again and again. If portions of the public sweep in, grab whatever they can, then never return to shop again, you can see why some deals are called a "steal."
4. Know Why You're Going Through All This Trouble in the First Place
Is it to generate some quick income and improve cash flow? Are you trying to attract new customers? Or maybe you want to reward existing customers, in which case perhaps a loyalty card is in order instead? Perhaps you want to create some excitement at your business. Or maybe you just want to make your company a little more visible?
The last reason is why Benjamin Franklin Plumbing, a franchise in Charlotte, North Carolina, offers coupons, says its marketing manager, Justin Kofron. "We mainly use them to build visibility," Kofron says. "If we get any visibility from them, it's worth the cost."
And for businesses that are only used occasionally and for a specific reason, that may be the only reason to have a sale—to build brand awareness. As Kofron says, "The hard part about coupons for plumbing is that you only think of a plumber when you need one."
In the end, there's almost no bad reason to offer your customers a discount and try to drum up sales. You just want to be careful in how you run it. Otherwise, your big blowout could lead straight to your last sale—a going-out-of-business sale.
Read more articles on sales.
Photo: iStockphoto
