Pricing strategies that will improve your EOFY sales
With the end of financial year (EOFY) quickly approaching, Australian retailers are preparing to launch their annual EOFY sales. Whether you own an online outlet or brick-and-mortar store (or both), it’s in your best interest to make the most of this sales period with pricing strategies that will appeal to your customers.
While it seems like there’s always one sale or another going on, EOFY sales are still seen as one of the best times to buy. Here is a breakdown of the most commonly used pricing strategies to help you sell more this EOFY.
Improve EOFY sales with these pricing strategies
Keep your target customers in mind while you scan this list of EOFY pricing strategies. For instance, if you’re selling luxury cars, your pricing strategy will likely be vastly different from someone who is selling handmade children’s shoes.
- Skimming pricing.
- Penetration pricing.
- Image pricing.
- Discount pricing.
- Loss leader pricing.
Let’s look at how strategic pricing can help you boost your EOFY profits this year.
1. Skimming pricing
This strategy is used for products and services that are relatively new to the retail market and have an initially high price tag.
Skimming pricing is commonly applied to big-ticket entertainment and tech items such as phones, televisions, smart phones and computers.
The initial price of an item is set high to attract shoppers who are willing to pay the price for the item as soon as it hits the market. Once the initial demand has softened, retailers lower the price to appeal to the more price-savvy consumers who are willing to wait a little bit longer for a good deal.
Advantages of skimming pricing
- Creates a buzz around the product and helps increase demand
- Generates high profit margins for retailers
- Retailer is able to recuperate development costs quickly
2. Penetration pricing
Penetration pricing is a strategy that aims to generate high sales by offering significantly lower prices during the sales period.
While this sales tactic may seem like a winner, it’s important to remember that unless you are selling to a large market and at a high sales volume, you run the risk of failing to meet your profit goals.
Penetration pricing is commonly implemented by more budget-friendly, non-elite retailers as they are more likely to achieve the high sales volume needed.
Advantages of penetration pricing
- Allows retailers to acquire and hold a share of market in a competitive environment
- Helps build brand loyalty by making the product more accessible
- Enables the retailer to achieve quick sales at a large volume
3. Image pricing
Image pricing, also known as premium pricing, is based on the perceived image of luxury goods, such as high-end cars, watches, clothing and jewelry.
These products represent status and hold much more value to the consumer than the actual cost. Think Porsche, Christian Dior, Rolex, Tiffany and other similar high-end brands.
These products attract a more elite group that is willing to pay top dollar for items they consider to be of high value.
You may not want to offer huge discounts during your EOFY sale; offer add-ons or free gifts instead.
For example, a luxury car EOFY sale might involve an extended warranty or free servicing for five years.
Advantages of image pricing
- Helps a retailer position themselves as a luxury or high-end brand that offers exclusivity
- Consumers are willing to pay extra for these products
- Retailers rarely have to slash prices
4. Discount pricing
On the opposite end of the spectrum from image pricing is discount pricing. This strategy is favoured by more budget-friendly brands. Consumers of these brands are usually more interested in getting good value over superior quality.
Discount pricing involves slashing the price of an item for a limited time. By using various marketing tools to create a sense of urgency and excitement, retailers are able to entice shoppers to order online or come to their stores before stocks run out or the sales period ends.
But before you go and slash all of your prices in half, make sure you do your research and plan your strategy accordingly.
Advantages of discount pricing
- Attracts new customers and encourage brand loyalty
- Allows retailers to offload unwanted stock
- Helps companies hit EOFY sales targets
5. Loss leader pricing
This strategy involves offering one product at a heavy discount in the hope that shoppers will purchase other products you sell. You may not make a profit — or in some instances even operate at a loss — but the payoff is that you gain new customers and/or sell other products or services with a higher profit margin.
While loss leader pricing may be tempting to implement for your EOFY sale, it’s important to remember that you need to be able to take a loss on the particular product you have marked down.
Loss leader pricing is often used by big businesses that can absorb a loss on some products/services in order to profit on others.
Small businesses often don’t have the resources to do this.
Advantages of loss leader pricing
- Attracts new customers to your brand
- Encourages customers to buy more items
There’s no one-size-fits-all pricing strategy
It’s important to think about which pricing strategies will work best for your particular business. By no means do you have to settle for just one of the five pricing strategies outlined above.
Find a strategy, or a combination of strategies, that allow you to meet your profit margins and encourage brand loyalty at the same time. It’s also very important to make sure you comply with Australia’s strict pricing regulations.
By making small price adjustments to your products or services, your EOFY sales period can increase sales, boost brand exposure and help you finish off the financial year with a bang.
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Image by: Justin Lim on Unsplash