Festive pricing: Go low and other strategies

in Money by Peter Wood
(2 Ratings)
festive pricing, festive pricing tips

From online superstores to niche shops in suburban shopping centres, many stores are currently facing the tricky business of setting festive prices.

Finding a balance between competitiveness to drive sales and discounting like a closing down sale can be a fine art.

Jon Manning, founder and managing director of consultancy firm Pricing Prophets, says too much focus on the holiday period discounts can make a poor long-term strategy.

“It’s really tricky with so much expectation in the marketplace from consumers who have discounts ingrained in their psyche,” Manning says. “They are used to seeking out the thrill of the hunt and want the thrill of getting a huge discount. You need to have other strategies in place so you can desensitise customers to price around the holiday season, so they don’t expect unsustainable prices year-round.”

Alternatives to slashed prices

Rather than trying to lure customers with the best advertised price, retailers could think ahead as to how they will get people back online or into stores throughout January, February and March. Coupons, mailing lists and special offers are high priorities for many stores, while a customer database tops the list.

In an era of online shopping, where brick-and-mortar stores are crying poor, adopting the ‘airline approach’ can also boost profits. Remember, consumers will often pay full price for airfares when the window for red-hot deals has closed.

Traditional retailers need to be aware of when the mail and delivery window has closed for consumers to get the best online deals in the days closest to December 25th. Stores can capitalise on margin if their strategy has steered clear of simply advertising slashed prices.

“Obviously, going too low also brings you close to your cost price,” Manning says. “There’s a myth out there that you can move so much volume that it’s going to compensate for the loss of revenue. So many retailers go for the price slash as a festive pricing strategy and everyone follows because they are too scared to hang tight. Do something to get customers in the door and working on value and bundling instead – how are you going to sell the gaming console as well as the game?”

Get creative this holiday season

Historically, even the biggest names in sales have delivered creativity to their customers.

Campaigns dubbed “The Burger Wars” between US chains McDonald’s and Burger King eventually led to massive losses when customers began to expect cut-price burgers at all times.

“Offer some covert price guarantees at your checkouts,” Manning says. “If customers are in your store for price-matching then hopefully they’re buying other things.”

Discount small, maintain large

A strategy of higher prices may not work across all products, and stores that have a clear knowledge of their product hierarchy can have an advantage. This may include not offering discounts across all inventory categories small, medium and large.
You could choose to hold your prices on most large and some medium items. Small stock can then be discounted without giving away the top end of your market. When your customers come back in February or March, their reference price will be the last price they paid.

Ensure your key items, such as where you stood your ground on price, remain the most memorable for customers and most profitable for your business.

This article represents the views of the author only and not those of American Express.

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Peter Wood is a freelance journalist with over 8 years experience writing for areas such as banking, finance, real estate, advertising and marketing more. Peter has contributed to regular columns in newspapers, business magazines and online, advising on issues such as business growth, cash flow management, investments and loans, credit control and more.

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