Many businesses use discounting in some form. Are you financially better off from using discounting? Do you track and check the actual financial performance of the promotion or discount?
The attached table shows the increase in sales needed to financially justify a given level of discount
Prior to offering customers discounts, it is really important to work out the financial effects at given volume levels. This provides clear volume hurdle levels – if these are not reached then the promotion is loss making
Offering cash discounts is usually the most expensive way to offer additional value to your customers. If you were to offer additional products (complimentary or additional), providing there is a profit margin earned on these products, your cost is lower than cash
Contact us if you would like to analyse a promotional campaign and understand your likely profitability