Effective Sales and Promotions to Grow Your Retail Business

In the retail world, sales and promotions are a big part of pricing strategy. Deciding which items to discount, when, and by how much isn’t a decision you should take lightly.

A sale or promotional offer here and there might not seem like a big deal, but the way you employ sales and discounts in your retail store can have a big impact on how customers perceive your brand—not to mention your bottom line.

Your main concern is to avoid over-discounting. Offering too many discounts can spell trouble for your store for a few reasons…


You’ll attract and create hyper price-sensitive customers. Consider Old Navy: after 2 years of daily emails yelling “50% OFF!!!” it’s unlikely I’ll buy anything at full price.


Over-discounting lowers your brand’s perceived value. Russ Chadinha of Pros writes, “In B2C sales, discounting that’s too steep or too frequent sends the message to customers that a product isn’t worth full price.”


You might alienate customers who already paid full price. When you buy something only to see it on sale for half off the following week, buyer’s remorse can strike in a hurry.

Effective Types of Promotions

For these reasons and others, it’s vital to your retail business that you build the right kind of sales and promotions into your pricing strategy. By drawing on extensive research around shopper behavior and psychology, you can use sales and discounting more effectively—so they actually help your business.


1. Free Gift with Purchase

One of the potential pitfalls and discounting your products is that you lower what customers think they’re worth. Instead of lowering cost, add more value for the same price. When you offer a free gift with purchase, customers spend the same amount, but feel better about it—they’re getting more value.

Besides creating a more valuable offering, customers love the word “free.” We go crazy for free stuff. Research shows that even just including the word “free” in your promotional language is a huge motivator for getting customers to buy. Even when a percentage off would technically save customers more money, they’ll opt for the free gift.


2. Buy One, Get One

If a free gift gets customers to buy, then a buy one, get one (BOGO) sale can convince them to buy more. Similar to the free gift offer, BOGO sales are all about adding more perceived value, instead of discounting your product’s value. Since customers purchase the first item at full price, that’s the value they associate with it. This type of sale is particularly useful when you need to make room for new products—like at the end of one season.


One pitfall to avoid: never offer a buy one, get one free unless you seriously need to move some inventory. Otherwise, you’re handing out free products to customers who may not even want them.

3. Percentage or Dollar Off Discounts

Percentage or dollar off discounts can boost sales and draw customers into your store without cheapening your overall value in the eyes of customers—but you have to use these sales wisely and judiciously. Keep money off discounts in the realm of 15-30% in order the maintain the product’s perceived value and be sure to give the sale a defined end date, after which the item returns to full price.

To get the most out of this type of promotion, you should know when to communicate discounts as a percentage and when to use a dollar amount. Research shows that percentages are most effective for products priced less than $100. For those over $100, the actual dollar amount is more likely to entice customers. To put it another way, whichever number is higher (the percentage or the dollar amount) is the one you should promote to shoppers.


Tips for Successful Sales


Once you know which type of promotion works best for your store and your products, there are a few other tips to keep in mind. These apply to any and every sale you offer, and they can help you create more effective sales and promotions that boost foot traffic and sales.


Keep your objectives in mind. Whenever your store runs a sale, you should have a clear and defined goal for that promotion. The type of sale you choose—whether it’s bringing more customers through the door or moving out old inventory—follows from that objective. For example, BOGO sales are ideal for moving inventory.


Tap into retail psychology. There’s a lot of research out there surrounding the psychology of retail. Use it to your advantage. For example, we know that shoppers are drawn to prices that end with the number 9. When researchers tested the same product at both $34 and $39, more shoppers made a purchase at the $39 price point, even though it cost more.


Use a minimum order amount requirement. We’ve already talked about the danger of over-discounting. One natural check on that is to predicate the promotional offer on a minimum order amount. Something like “Spend $150 and get $20 off” can lessen the impact of promotions on your bottom line and entice customers to spend more to reach that threshold.


Create urgency around the sale. In order to maintain the perceived value of your products at full price, sales and promotions should always have a clear end date. When you communicate this to shoppers, you also build a sense of urgency around the product. Another way to build urgency is by limiting your stock of the promotional item.


Be transparent. No matter what conditions you set on your sales, the key is to be transparent about them. Don’t advertise 30% off only to tell shoppers at checkout that it only applies once you spend $100.

Sales and Promotions That Boost Your Bottom Line

Offering sales and promotions in your retail store can be a really effective way to boost foot traffic, convince shoppers to buy, and boost your sales more generally. What’s important is that you don’t let sales and promotional offers cut into your bottom line. When offering intelligently—with your store and objectives top of mind—sales can actually grow your bottom line (and your business with it!)

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