The question I'm most often asked when I speak about my book How To Sell When Nobody's Buying is how important are sales and discounting (like Groupon) in growing my small business?
The answer of course is not simple but there are some key ideas thatyou should consider.
Black Friday sales were up 9% over last year according to Comscore and online purchasing on Thanksgiving day was up a whopping 28%. There is a definite move to shopping online and this may be one ofthe most important thoughts to come out of all of this data. You must focus on selling your products online, not just from your website but also through other distribution sites like Amazon.com and affiliate programs if you are the manufacturer of the items yousell. If you are a reseller then you must focus on creating an inviting website that is well designed and easy to find in the search engines. Buyers are spending less time in stores and more time online small businesses must be sure they are properly prepared to get their part. The writing is on the wall, if people can't find you online and buy from you during their search there is a high likelihood that they will buy from a competitor.
So, what about Black Friday or Cyber Monday sales and discounting through sites like Groupon or Living Social? If you are not familiar with Groupon or LivingSocial click the links and sign up to see and take advantage of what people are discounting in your city. Living Social even gives you $5 in free cash to use for your first purchase when you click the link and sign up. It is important as a small business that you review and understand how these services work. But in a nutshell, a certain number of the deals need to be purchased for the deal to be active and for you to get the discount. So, in order to be sure to get the discount you are encouraged to send the deal to as many of your friends and family as possible so they can take advantage too.
There is no question that in this economy people are moved by sales and discounts. Sales done properly are definitely OK, but to have a sale you have to ask yourself the question, what do I hope to accomplish by having this sale? Is it to blow out inventory? Is it to lead with a product where you can upsell or where add on or impulse purchases at full price will help offset the discount? Are you doing it to bring more people into the store so you can increase the customer base you can market to directly (and are you collecting names, emails, addresses and phone numbers when they come in)?
How much will it cost to have the sale? In the case of Groupon or LivimgSocial it will cost you 50% of the sale price for them to expose you to their network in your town. So the real cost of the discount is 75% off of retail which may work depending on the lifetime value of your customer and what else you can sell them when you get them in the door. It is also very important that you have a systematic upsell process once you get them into your establishment. If you don't put them through a sales process, conversion to regular consumer is dismally low. And, you must get them into your marketing funnel by gathering their name, address, email and telephone number so you can market to them on an ongoing basis. But before you do any sale or coupon, ask yourself, if people only come in and buy the sale item and buy nothing else, is this still a good deal for me? People who are conditioned to buy on sale often only buy things on sale or negotiate heavily.
Black Friday and Cyber Monday sales take advantage of mass consumer buying behavior and massive attention from national and local media talking about the sales companies are doing. A lot of customer pre-persuasion is done for you. Now it is up to you to create urgency using persuasion principles like scarcity (limiting time or quantities available) or reciprocation (giving a gift for buying a product). These sales work because people are on auto-pilot, they are ready to buy and they'll buy not only what is on sale but other things in the store because they are already there. This is where small businesses must have sales staff on hand to up sell and cross sell those people who are there. Another key is to be sure that you deliver an amazing experience when people shop with you. Experience is everything and often the first thing to go in a crust of customers is the amazing experience you normally deliver, don't let it go, focus on experience first and last.
When done properly sales can have a powerful impact on the bottom line both in terms of new dollars created but also in new customers created. Just be careful, don't over do it. A sale every week isn't a sale, it simply conditions people to buy your products when they are less expensive. Reward loyalty. Have a pre-Black Friday sale for your best customers, offer them an opportunity to come in Thanksgiving evening to get a very limited quantity taste of what you'll be offering on Black Friday. Only invite customers who've purchased something from you in the past, limit the quantity and the time, if they miss it they can come to Black Friday or Cyber Monday.
It is very tempting to discount a lot and often in this economy, but don't over do it. Conditioning people to buy from you because of sale prices will only lead to to the expectation that you'll always have sale prices, even when the economy comes back around.