To survive in a competitive market, businesses need to adopt new strategies. One effective strategy is offering business discounts. From attracting customer attention to increasing sales, building brand awareness, or clearing out stock—there are many reasons why businesses offer discounts. Simply put, a business discount offer is a powerful marketing tactic that attracts customers and helps boost sales. However, if used incorrectly, it can also lead to losses. Therefore, it’s important to understand the right rules, timing, and methods before offering discounts in your business.
In this blog, we will discuss what a discount is, why businesses offer it, when it yields the best results, how to determine the discount, and when it becomes successful or fails.
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What is a Discount or Price Reduction?
A discount is a reduction of a specific amount or percentage from the original price of a product, which encourages customers to make a purchase. For example, if you offer a 10% discount on a product priced at ৳1000, the customer will buy it for ৳900. This motivates customers to buy more than they initially needed and can help your business stay ahead in a competitive market. Discounts can be offered in various ways—
- Percentage Discount: For example – 20% off on all products or on selected items.
- Flat Discount: For example, a flat discount of ৳50 or ৳200 on specific products.
- Buy One Get One: Buy one, get one free.
- Time-limited offer: For example, "Ends this week!", "Eid Offer", "Summer Offer", or "Annual Offer", etc.
It should be remembered that this is not just a strategy to attract customers. Often, this policy is implemented to keep the business afloat!
Why do businesses offer discounts?
In business, discounts are not offered just to increase sales; there are several practical reasons behind them:
1. Increase sales: Giving discounts means selling more at a lower price. Although the profit per unit may be less, the overall income can increase through higher sales, which is why discounts are offered.
2. Clearing old stock: Products that are not selling on time or have low chances of selling are best sold with a discount! This creates space for new products and allows for new marketing initiatives.
3. Attracting and Retaining Customers: Offering discounts in business attracts new customers and encourages existing customers to return more regularly. In other words, it increases customer brand loyalty toward your business!
4. Competing with rivals: By offering products at lower prices than competitors, you can stay competitive in the market. Moreover, in the long run, customers may not remember the price but will remember the quality of your products!
5. Building Brand Value: Festive discounts or exclusive offers help your brand stay memorable.
When is the best time to offer discounts in business?
Discounts don’t always work effectively in business. When offered at the right time, they can be profitable. Here are some examples of good timing, but the best time depends on your type of business—
1. During festive seasons: Eid, Puja, Pohela Boishakh, or the English New Year are times when customers shop more. Offering discounts during these periods can double sales. Simply remember, discounts should be offered during events or times when people set aside a separate budget for spending.
2. Seasonal Clearance: Many summer products don’t sell in winter, and many winter products don’t sell in summer. So, clear your stock by offering discounts before the season ends. This is a good discount offer strategy.
3. Before launching new products: Give discounts to clear old stock that has been sitting for years. This creates space for new products and keeps the business cash flow steady. Now, focus on launching new products!
4. During sales drops or off-seasons: When sales drop for any reason, discounts can help speed up sales again.
How to Determine the Discount on a Product’s Price?
To avoid losses while giving discounts, it’s important to know how to calculate them. Learn how to determine the discount on a product’s price in a few steps.
Step 1: Determine the Cost Price (Purchase Cost)
First, calculate how much it costs you to make or buy a product. For example, if you bought a shirt for ৳500, that is the cost price.
Step 2: Determine the Profit Margin
Suppose you want to make a 30% profit, then the selling price will be = 500 + (30% × 500) = 650 Taka.
Step 3: Calculate the Discount
If you want to give a 10% discount, then the selling price will be = 650 – (10% × 650) = 585 Taka. Alternatively, you can give a fixed amount discount, such as ৳100 off per shirt.
Step 4: Check if there is still a profit.
If the selling price after discount is still higher than the cost price, you are still making a profit.
Keep these three tips in mind when following this process—
- First, know the cost price.
- Do not give excessive discounts. Customers may become suspicious!
- Set a time limit for discount offers; otherwise, you may lose control or fail to increase sales!
- You can use software to ensure profit. Also, use accounting apps to easily calculate discounts in transactions.
Easily calculate discounts on transactions using the HishabPati app!
If discount strategy implementation is done incorrectly, it can lead to losses instead of profits. To ensure every transaction is accurately accounted for, use the HishabPati app. With this app, you can easily calculate product cost price, profit margin, and discounts. This keeps all the business details clear and in real-time at your fingertips. As a result, before offering discounts, you can be confident about how profitable each offer is.
When does a discount flop and when does it hit?
A discount offer flops when:
- The product quality is poor.
- The discount offer is not communicated properly to the customer.
- The offer lasts indefinitely, which reduces its attractiveness.
- Competitors offer better deals on the same product.
A discount offer hits when:
- There is a limited-time attractive offer.
- Promotion on social media works well.
- The product quality matches its price.
- The terms and conditions of the offer are clear and easy to understand.
- Offers are given in alignment with festivals, special days, or seasonal needs. For example, offering discounts on umbrellas and raincoats during the monsoon season works well.
In short, to make a discount offer successful in business, there must be a plan. Simply offering a discount is not enough; it must be a ‘smart discount.’
In business, discount offers are a powerful strategy that can accelerate growth. Whether a discount is profitable depends on how you implement the strategy. Avoid unnecessary offers and give targeted, timely discounts. Only then will you achieve your desired results.
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