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Promotional Pricing

Disciplines > Marketing > Pricing > Promotional Pricing

Description | Example | Discussion | See also

Description

Tie prices to marketing campaigns with various deals, offers and so on that tempt customers into buying. This may well include use of advertising, special displays, leaflets and web discounts.

Promotional pricing strategies that may be used include:

• Direct discount on goods, including percentage reductions ('10% off') and special pricing ('89c, this week only').
• Bulk discounts and variants of this, including 'buy one get one free' (BOGOF) and 'three for the price of two'.
• Price matching, where a range of goods (or all items) are promised to be at the same price as competitors.
• Vouchers that offer single discounts, such as from the above list, or which need to be collected, for example where more vouchers
• Loyalty points that can be used to purchase goods or even give a 'cashback' that amounts to a discount on all goods.

Example

A supermarket runs a 30-day promotion with a loss leader on a popular brand of baked beans, undercutting competitors by 80% and with a big display just inside the store.

A new hair drier being introduced is offered at a low 'introduction offer' for the first 1000 products sold.

Discussion

This is a method common in the highly competitive retail sector, and in particular groceries where vouchers, discounts and other deals are commonly used. The ability to offer discounts and strike deals may also be used in business-to-business deals where sales people are directed to push certain products, make short-term offers and are given leeway to negotiate more broadly than usual.

This can become a kind of silent, collaborative game where the customer waits for a deal and then reliably takes the bait. In this way voucher-collecting and waiting for special deals becomes a way of life where customers feel as if they have got a bargain, even though they simultaneously realize that they are being manipulated.

It is also possible to raise prices during a promotion as the marketing brings in new customers or those who have forgotten the price. This is typical when new products are introduced and the higher price can be explained in terms of new features and capabilities of the target item.

See also

Negotiation