As a small business owner, you're always looking for ways to increase the value of each ticket. One of the most effective methods of doing so is through promotions, such as loss-leaders, BOGOs, freebies, and tiered pricing structures. These can be essential strategies to driving your sales.
Loss Leaders
This is a pricing strategy where you offer a product or service at either a lower profit margin or not profit at all. The idea is that the customer will come in for the deal, and while they're there, they'll also purchase other items at full price. This may sound like a counter-intuitive way of making money, but many large organizations do this. A prime example would be Costo’s rotisserie chicken. Priced at only $4.99, plenty of people go to Costco to pick up one of these entrees and purchase sides or other groceries at full price. It's a great way to get people in the door and introduce them to your business.
BOGOS
BOGOs, or "buy one, get one free” tends to be a catch-all term for deals that include a volume based discount. This is a powerful motivator for customers who like to feel like they're getting the best deal. A great BOGO structure has items with extremely high margins to play around with and a deal so good it’s hard to pass up. An item purchased for $1 and sold for $10 with a promotion offered at 2 for $15, is hard to ignore. This is a great way to move excess inventory, introduce new products, or upsell customers.
Freebies
Customers love getting something for free, even if it's a small item without a real purpose. It can be as simple as a sample of your product, a discount coupon for future purchases, or a branded giveaway. Giving something away for free is a great way to build brand loyalty and entice customers to come back. Stickers and temporary tattoos with your logo incorporated is another example of the perfect freebie.
Tiered Pricing
A tiered pricing structure is a great way to increase your average order value. This strategy involves offering different pricing levels for your products or services. For example, you could offer three versions of a product at three ascending prices. The middle option will likely be the easiest to sell as it appears to be better quality than the discounted price while still being more affordable than the premium option. If you have a specific profit margin you’re aiming to make, building it around target sales for the middle tier would be a realistic objective.
Promotions are a powerful tool for small businesses looking to secure an increase in revenue. Loss-leaders, BOGOs, freebies, and tiered pricing structures are all effective ways to attract and retain customers. By experimenting with different promotions and finding what works best for your business, you can drive sales, increase brand loyalty, and ultimately, grow your bottom line.
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