With the festive season well and truly upon us many consumers are expecting to see sales, reductions or discounts offered by all their favourite retailers – but as a business owner, is that the right move for you?
We all know that many large chains increase their prices for a few months before the regular sales seasons just so they can discount items when their customers expect it.
Many may disapprove of practices like that, but if you set aside the moral issues surrounding this practice, are these monster businesses simply making astute financial decisions that ensure they are being paid the true value of the products and services they sell?
Price discounts account for a huge share of the turnover of almost every business in the country. Our years of experience working with businesses across a range of industries have taught us that many company owners waste money by charging prices below what they could and should be getting.
In fact, we estimate that, on average, businesses in this country are giving away about 30% of their revenue at list price in the form of discounts.
What’s more, national research shows that if the average business in the UK could nudge its average prices up by just 5%, it would double its profits!
Christmas accounts for a huge proportion of retail sales and, with demand for products, there should be no need to discount. The only reason for discounting is to increase the volume of sales over the Christmas period. Stepped discounts (sometimes referred to as incremental discounts) are where the discount only applies to the additional volume and these are the only discounts that should be used.
Economists claim that prices are set by markets. But they are wrong. Prices are set by people running businesses. People like you. And they are among the most important decisions you will ever make. Get them right and you could be on the road to fame and fortune. But get them wrong and your business will be doomed to failure.
To learn more about how you should be approaching your pricing strategies, download our e-book on Pricing Strategy here…