There are a large number of pricing strategies out there, which can increase the growth of your business. By saying ‘growth of your business,’ remember this means an overall growth. Do not misunderstand it as a growth, only concerned with the growth of sales or profits. Of course, an increase in sales and profits will be beneficial, but without other factors, even sales will dropdown.

Had enough of introduction, now let us focus straight on the topic, which is a pricing strategy. Promotional pricing by name, it is the most powerful promotional method that can boost sales tremendously. By slashing down the price of products massively, the company enjoys a sudden acceleration in sales. This pricing strategy is a common practice of both retailers as well as manufacturers of a product.

Now, coming to the verdict point, is it a boon or a curse for your brand. Showing a set of pros and cons, you will read the final verdict at the end of this post.

Pros of the Promotional Pricing Strategy

Evidence Maximum Traffic

This pricing strategy attracts customers from all segments. Divide the society into two types – the budget-conscious and the all-time rich people. The number of the first segment will flood the latter’s numbers. The promotional pricing strategy makes sure that your website gets the maximum footfalls, and that is surely a boon.

Upsurge In The Growth Of Revenue

Keeping a steady growth in revenues is very important for brands to settle debts. Now, the sale of products is not constant throughout the year, and therefore, revenues go down. In this pricing strategy, you can revive the growth and even see an upsurge in the revenue rate. So, you can count this as a boon too.

Attract Buyers’ Attention Greatly

Sometimes, buyers are just in search of red or yellow tags, which hold discounts. The thing works psychologically where, even with the slightest of discounts, you can still attract them. Here, you enjoy an increase in sales as well as see your profit levels rising reluctantly. Although some clever customers will catch this step, most of the others will become loyal customers just to keep buying discounted products. Of course, this is another boon too.

Increase Customer Loyalty

Instead of always offering discount tags, there is also another strategy under promotional pricing. As said before, loyal customers are very important assets to any brand, big or small. You can arrange special discount coupons for selected customers who buy a lot from your website. In that way, you can indirectly make the customer come back over and over again.

Cons of the Promotional Pricing Strategy

Wise Customers Will Part Ways

Today’s customer-base is becoming wiser day by day. They know what the market value of a product is and what you are offering minute price cuts. These customers will tend to avoid you as they have already had a lot of festive sales and Black Fridays. Any further pricing strategy might not work on them.

Oversaturated Market Will Slow Down Sales

Stop thinking that your rival brands have no idea why every customer is talking about your brand. Eventually, the other brands will also bring out their updates prices to challenge your market share. The chances are that they will push the prices further down, and this race will go on and on, enough to dump sales down.

Cheaper Products Can Question Your Brand’s Standard

Here comes the biggest disadvantage of using this pricing strategy. When you push down price tags so that you get all the hype and footfalls, it can raise questions too.

Just for an example, suppose you are selling a 300 bucks headphone for just 120 bucks. While a section of buyers will rush to buy it, there will be a big queue of others, who will suspect the item to be either damaged, old, and so on. It can seriously affect the image of your brand.

Adverse Effects Can Kill Profit Levels

Once you make it a habit of offering things at the lowest prices, buyers will begin to buy only on events. They will know when the price cuts down and so will avoid buying anytime else other than those times. This can seriously choke your profits as well as sales because you will not be able to offer aggressive pricing for 365 days. Even if you offer, you will start to lose reputation as well as murder your profit levels permanently. Is this what you wanted all these times?

Reading so far, you can see that this promotional pricing strategy thing works well for a limited period. Once you default the price, customers will avoid you, and if you keep offering, profits die. So, this promotional pricing stuff is not at all suitable for your brand’s growth in the long run.

Nikolay Savin, Head of Product at Competera. Combining 8 years of experience in supporting technology businesses and entrepreneurship in Europe on their effort in Silicon Valley with building a product for retail revenue growth Nikolay is passionate about sharing stories on technologies and innovations for retailers to help them grow. @nikolay_s

Pricing stock photo by Azamatovic/Shutterstock