Discounting

I was listening to an interesting discussion about discounting last week (don't laugh, just pity Liz who has to work with me!)

The consensus semed to be that there were 2 very distinct reasons why businesses cut prices

• Managing supply and demand. For instance hotels will offer better prices on rooms out of season when they have excess capacity
• Offering products to Bargain Hunters. It is estimated that even when we are not in a recession 20% of consumers are motivated to  buy purely by price promotions

In retail we are more geared up to offering promotions as unless we sell food our products have a very long shelf life

However if you continually promote then consumers will come to expect a discount and will not buy without one (think furniture retailers) If you get in to this situation then you have undermined the actual value of your product - just how much should a sofa cost?!

In toys Woolworths also did this and took a considerable market share on the basis of cheap toys. But as we have seen volume is vanity and profit is king. Anyway one can sell cheap products but more retailers have collapsed at the value end of the market than premium

The opposite of this is Whisky and Perfume manufacturers who will not discount the price of the product however tight sales are as they believe that their products are aspirational and therefore cutting prices is counter intuiative

Best Years, as a soft toy wholesaler, offer price promotions for 2 distinct reasons.

We have a Sale once or twice a year to clear the remnants of stock where we have decided not to re-buy the line. Stocks are usually very limited so the trade price can be cut substantially. We also offer promotions at trade fairs as we do like to see our customers at trade fairs. this is not just for the pleasure of your company but also because seeing all our ranges in the flesh makes you more likely to buy a wider range than when buying from the website