In addition to the different site elements and sales techniques, price and price promotions are the most important tool of the online merchandiser.
The online merchandiser (or purchaser or marketeer, as who decides differs per organization) can chose to give a discount on a product in order to sell more. The discount can be a percentage (10%, 20%, 40%) or a fixed number (5, 10, 15).
Discounts are an easy-to-use tool but also a dangerous one:
- It directly reduces the product's margin.
- Competitors can react by dropping their prices as well, nullifying the effect.
- Customer are increasingly less impressed with discounts of 10 or 20% and may only buy at higher discounts.
- Discounts rarely fit well with premium brands.
The figure above shows a discount at Saks. Question is why does Saks want to sell new bags at a 60% discount?
Discounts & Price Promotions
Other forms of price promotions include:
- Buy X products for the price of Y products. For example, buy 3 products for the price of 2.
- Buy Product X get Product Y free, where Product Y may also be a gift card or voucher.
- Free shipping at an order over X: Shipping costs are one of the most important reasons consumers do not buy online. Many retailers therefore offer free shipping if the total order value exceeds for example 20 euros.
- Buy X and get a free gift
Price promotions may apply to specific products but also to product categories, to brands and for certain customer segments. As a result price promotions can rapidly become very difficult to manage as the video below illustrates. Individual price rules may be complex to understand and overlapping. Many retailers have hundreds if not thousands of price promotions.