How Do Pricing and Promotions Impact Revenue?
After advertising spends, the second most important marketing lever is pricing and promotion. Let’s watch the video below to understand how these factors affect sales and revenues.
We also talked about promotional pricing. There are 10 common types of promotional pricing:
Free shipping and free return (e-commerce companies): The supply chain costs and the reverse supply chain costs are borne by the company.
Flash sale: These are sales of a very short duration. For example, Xiaomi smartphones are always sold through flash sales. Van Heusen holds a premier sale for a limited time period for their loyal customers when fresh stocks arrive.
Branded freebies: For example, towards the end of winter, Nescafé or Bru offers a coffee mug along with a pack of coffee with minimal extra cost. This is to ease out the price hike and set a higher price for the next season.
Buy more and save more: Promotions such as 'Buy 2 get 10% off', 'Buy 3 get 15% off' and 'Buy 5 get 30% off' happen to clear stock.
Loyalty points: For example, you get points for each ₹100 spent, and after accumulating a certain number of points, you can redeem them. This can be seen as 1% discount throughout. It creates a loyal customer base and increases repeat purchases.
Organising an event or competition among customers: For example, the home furniture company IKEA asked their customers to take photos of their IKEA furniture and post them on social media. The winner received a gift voucher. This increased the company's visibility with zero cost of advertising.
Gift coupon: After you buy products worth a certain amount, you receive a gift coupon worth 10% of the purchase that you can redeem during your next purchase. This once again ensures repeat purchase.
Promised price match: Big Bazaar announced that if someone can buy the same product at a lower price anywhere else, they would give them double the amount in return. It was a bold step to create price-sensitive loyal customers.
Holiday discounts: An example of this are discounts being offered during a certain holiday time when customers tend to buy more. This creates a feel-good factor and leads to a traffic push. Flipkart’s 'The Big Billion Day' is one such promotion.
Discounted products: Sometime, companies announce huge discounts on certain products like 40% or even more. This happens mainly to clear old stocks or even clear slow moving/non-moving stocks.
You have already seen the factors that are responsible for arriving at the optimal price of a product in the earlier module.