Steve Gales, sales director at consultancy Opia believes smart sales promotions can make an alternative to price cuts…
In price-sensitive markets, achieving any significant sales uplift without resorting to discounting might seem optimistic.
Yet, using a creative sales promotions strategy and tapping into buying trends is exactly what some of the biggest online and offline consumer electronics retailers in the UK have achieved – time and time again.
Their success is based on the understanding that, as long as consumers feel they have got a good deal, they do not always seek to buy goods for the lowest possible price. Large or small, the more retailers and resellers look for alternatives to price cuts, the more the market as a whole will benefit.
Cash back offers in particular are a highly effective promotional mechanism, especially when it comes to boosting sales of premium brands. Rather than following the traditional route used by retailers and resellers – i.e. selling new items at the highest price then gradually lowering the price over time –cashback, trade-in and trade-up help move inventory and maintain a price position for longer, while also giving customers a good deal.
As well as contributing to better margins, this can also lead to better relationships with manufacturers that want retailers to find more creative ways to appeal to their range of customers.
For large operators, this could mean building sales promotions around key seasonal events such as back-to-school or Christmas, as well as major sporting events. For the smaller, independent retailer without the budget for a big campaign, this could mean capitalising on a manufacturer’s marketing budget. In this scenario, the manufacturer optimises their promotional accrual, the retailer generates more sales and the customer gets a good deal, benefiting the market as a whole.
In the past, even large retailers with big budgets have been cautious about a promotion turning out to be much more popular than anticipated – leaving them out of pocket. This is where a risk-managed promotion opens the door to a scale of risk that retailers’ and manufacturers’ profit and losses would normally reject.
Increasingly, in the shift away from discounting, consumer electronics campaigns are also moving towards generating future value and customer loyalty. For instance, the manufacturer or retailer may guarantee an attractive buy-back value on their customers’ purchase price when they buy a replacement within a set time.
When a customer purchases from that brand or retailer today, they will be incentivised to upgrade again in the future, locking them into a shorter refresh cycle and deterring them from shopping around.