subject: The Effect Special Deals Have On Product Sales. [print this page] Special offers are actually utilized by organizations to bring in numbers of people. They are utilised to tempt a lot of shoppers into a store. In addition to the products priced in part at a loss, the customer is motivated to buy items regularly priced as well as at comparatively high prices. The sales training theory goes that your pricing plan ought to be calculated to level out differences. Whether this theory actually works in practice has been researched in eleven supermarkets by American scientists.
For each customer it was ascertained:
Whether and in what quantities the promotional products were bought.
Whether and in what quantities regularly priced products were purchased.
Whether or not the client came in to the store because of the special offer or not.
The results showed that around every 7th customer (13.6%) comes into the store because of the special deal but the vast majority would have visited the store anyway. Interestingly, just about 50 percent of the bargain hunters (6.6%) in fact purchased the promotional products. Follow-up inquiries revealed that in the majority of situations the promotional goods were picked up but in place of these regular products ended up being purchased. On average, all those shoppers who visited the shop on account of the special deal spent $11.30 on promotional goods and $18.48 on regular items.
Consequently, every dollar spent on promotional offers stands against $1.63 for items at standard charges. This speaks in favour of an enormous drag along effect within the price policy calculated to level out the differences.
The whole purchase volumes of on average $29.78 for the bargain hunters does not vary significantly from the normal purchasing volumes of $25.17 for normal customers.
A common argument used by individuals opposed to special deals on sales training courses is the so-called Cherry-Picking effect, which is, exclusive purchase of promotional products. Nonetheless, though every 5th bargain hunter (23.1%) proved to be a cherry picker, seen in absolute terms this group, with 3.2% of all of the shoppers, is small to the point of disappearing.
This being the case how do those shoppers behave who do not go to the shop expressly due to a special offer? The vast majority (69.9%) do in reality stay with buying regular items, merely 16.5% go for special deals as well. Their purchase volumes of promotional deals, on average $17.12, lie considerably beneath the corresponding value of $22.44 of the bargain hunter.
Based on this, the risk of giving away cost coverage "unnecessarily" with special deals is very great.
This being the case how much cost contribution did the individual types of buyer deliver for every sale? Viewed over all buyers, every individual purchase delivers an average contribution to cost coverage of $5.75. The typical values of bargain hunters ($5.64) and normal customers ($5.77) differ only minimally from each other.
Hence the assertion that special offers just appeal to unprofitable customers is wrong. No doubt there's a small group of customers who visit a store due to the special offer and either purchase only or predominantly promotional merchandise. But at 6.6% of all shoppers this group is so small that the modest contribution to costs of $4.69 for each customer doesn't come into the balance.
On top of this comes the actual fact that by far and away the most worthwhile shopper (contribution to costs of $6.53) would be the one who could have come because of the special offer but finally just purchases normal items.
In conclusion, the fear expressed by sales people on sales training events that special offers jeopardise the profitability of normal shoppers is unfounded. The contribution to costs of a ordinary buyer lowers by only four cents from $5.78 to $5.74 as a result of the (unplanned) purchase of promotional items.