What is Promotional Pricing?

Promotional pricing is one of the most powerful sales strategies there is. Prices can be reduced by a percentage amount for a limited duration and an item is therefore deemed to be in a sale.

This helps to increase the demand for the product from price sensitive consumers.

Many businesses will offer promotional pricing as a sales incentive when initially launching a particular product line.

Types of Promotional Pricing

BUY ONE GET ONE FREE

A common retail promotion is buy-one-get-one-free, or BOGOF as it is colloquially referred to. This strategy is widely used both by manufacturers and retailers to gain market share and attract customers to a product, shop or a brand.

Manufacturers use this technique to make customers aware of a particular product line or service.

COUPONS

Money off coupons have long been and remain the most commonly used form of price promotion. The coupon will be offered to consumers through newspapers/magazines, the Internet or via email.

POINT-OF-SALE DISCOUNTS

This is the most simple type of price promotion method. A shop will simply advertise an amount-off or percentage-off point-of-sale discount.

Once a discount has been decided upon, employees change the product barcode price and/or the price tags - and probably signage throughout the store.

LOYALTY SCHEMES

Rewards are offered for being a part of the scheme and the more the customer spends the more points they accumulate, which leads to greater rewards.

Sometimes the reward sheme is tailored/customised to the individual customer, e.g. SPARKS at M&S, with offers on goods and services which that customer is most likely to want, need or purchase.

TRADE PROMOTIONS

What about the B2B market? Well, it should come as no surprise that price promotions are also offered here. Businesses that buy for consumption receive similar incentives to consumers.

Trade buyers that purchase products from suppliers for resale receive several distinct price promotions.

Pricing incentives are generally intended to bring in customers, drive revenue and cash flow and turn over stock.

They should usually be considered as a short-term approach for companies, though some retailers use recurring promotional pricing as a way to maintain ongoing purchases from price sensitive buyers.