Which discount system to choose for your store?

To successfully conduct trade and stimulate sales, many companies periodically use a system of discounts to attract customers. Discounts can be completely different:

• one-liners;
• to the world;
• discounts for the thousandth customer;
• accumulative system of discounts;
• discounts for the first buyer;
• Club discount. (By the way, the Club discount system is perfectly implemented in the Torgsoft accounting program)

The most important thing in this system is to correctly calculate what percentage of the cost of the goods should be discounted? And will this strategy work?

There are many variations of pricing in the modern market. In this article, we will try to explain how to set the right price for a discounted product.
Before determining the amount of the discount, you need to determine how much the product will cost you. This can be easily calculated using the following formula:

Purchase price + Transportation costs = Final cost of goods

The purchase price is the cost of the purchased goods. Transportation cost is the compensation for transportation costs. If, for example, you buy 100 pairs of shoes for $5 and pay $2 for transportation costs, the final price of each pair of shoes will be $7.

If you assume that you plan to incur some other expenses, for example, for the delivery of goods to the direct buyer, then you should include this amount in the cost of the goods.

To properly set up a discount system for a customer, you also need to know the history of turnover. Before you calculate a flexible system of discounts for a product, you need to review all sales of a similar product at a standard price. Calculate the revenue from the sale of one unit of product, as well as the number of products sold, say, per month or per quarter. Before establishing a discount system, it is also important to determine the cost of the product and the specific goal that you plan to achieve.

Let's go back to the specific case of selling shoes. For example, you have already determined that one pair of shoes will cost $7. And if you sell a pair of shoes for $9, you will make $2 per pair. Next, analyzing sales for the month, let's focus on the number of 200 pairs of shoes. If you sell shoes at the standard price, you can have a monthly profit of $400.

The next stage in the formation of a discount system is to formulate the goals and reasons for implementing such a marketing process. This can be:

• Emphasis on subordinate legislation;
• Getting rid of warehouse balances;
• Attracting customers, etc.

The pricing of products and sales activity will mainly depend on what specific goal you set for yourself. Having decided on the goal, you need to make sure that the price of the product will be profitable for you. If you want to get rid of a product that has been in the warehouse for a long time, you need to consider all sales options.

How to set a specific amount of discounts

Having a specific goal, you should also think about the size of the discount. For example, you plan to increase your monthly shoe sales revenue by 20%. A discount will significantly help increase sales, so if a pair of shoes costs $10, you sell them for $9.50, which means you make a five percent discount. If you set a regular price, you would earn more, but you would have to sell more pairs of shoes to make it happen.
Important! Before setting up a discount system for a customer, you need to make sure that you have set a realistic goal that can be achieved by reducing the price.

And finally, it is imperative to analyze the effectiveness of the discount system to determine whether there is any benefit from its implementation in trade. From time to time, you need to monitor the price to determine the effectiveness of the discount system. If you set a specific goal to increase revenue in March, but by the middle of the reporting month you have already reached 15% of revenue and sold more than half of the goods, you can start gradually reducing discounts and then cancel them completely. There are cases when customers don't really respond to discounts, and the sales are sluggish. In this situation, you should also consider canceling discounts.

Summarizing the above, we can conclude that a discount system is a good way to attract customers and increase sales, if you know the right amount of moderation. To begin with, you can set up a system of discounts for regular customers, and only then, after analyzing the situation, make discounts for all customers. In any case, you need to think carefully and calculate everything first so as not to end up at a loss.

Let's take another example. A seller comes in and says: "I have a great client who is ready to buy a batch of goods, but he wants a discount." The manager naturally understands that if he gives a discount, he will lose part of the margin. The manager has a logical question: "How much more goods will the customer be willing to buy if we give him a discount?" This is a simple formula that should be at hand in the sales and marketing department.

Increase in sales of goods = (Discount / marginal income - discount) * 100%

Below is a table with margins of up to 25% and a discount of up to 10%.

How to work with the table? Let's say your margin is 4%, you want to give your customer a 1% discount, which means you have to sell 33% more goods (in monetary terms), which will be equivalent to selling goods without a discount.

If your margin is 25%, and you sell a batch of 100 items, you can create a beautiful tariff grid: take 125 items and get a 5% discount; take 167 items and get a 10% discount. In this case, you do not lose anything, and the client receives motivation in the form of a discount. Of course, it all depends on the specific case, but the table will greatly help you in determining the boundaries of the discount.

You can implement a discount system in your business using the Torgsoft accounting program, which has a wide range of functionality that allows you to organize and calculate the necessary promotions.