What's up brand builders Stephen Houraghan here at BrandMasterAcademy.com and in this
video you're going to learn what promotional pricing is
including strategy pros and cons so you can understand the promotional angle of
pricing your products to make a strategic decision for your brand's pricing strategy
now if you're new to the channel and you want to build brands that go beyond the visuals using
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brand strategy blueprint it's a free download and the link is in the description now we've
pretty much all been there we see a product on promotion and we see an opportunity maybe
you've been thinking about that product for a while or maybe it's brand new to you but either
way the discount and the perceived value pulls you in it really draws you into the opportunity and in
the end it's an easy decision you look at what the value is and you look at what you can get it for
and it's a bit of a no-brainer and just like that you're pulling out your credit card and you're
making that buying decision now if you want to boost sales as a business as a brand there is no
better way to do that than promotional pricing but why is promotional pricing so effective and how
and when should and shouldn't you use the strategy well that's exactly what you're going to learn
in this video so what is promotional pricing well let's start with the definition first and foremost
promotional pricing is a price and strategy used by brands that want to drive short-term sales and
they do this by temporarily reducing the price of products or services to entice customers to
buy before the offer expires and that's often done through integrated marketing campaigns now
without a doubt promotional pricing is one of the most effective strategies for driving short-term
sales and brands that leverage it effectively can expect to see spikes in sales and revenue for the
period of that promotion but although promotions tend to be associated with retailers they're also
used frequently by restaurants gyms airlines and service providers to name a few but essentially
brands that want to drive more sales in the short term can leverage the promotional pricing strategy
now i've alluded to it already but the goal of promotional pricing is to drive more sales in the
short term and to boost immediate revenue and the bottom line for the quarter or for the year and
often this approach is used as part of a longer term strategy and not as a standalone approach to
pricing products and services promotional pricing is without a doubt a highly effective strategy for
driving more sales however its effectiveness over time does depreciate brands that use promotional
pricing need to be aware of the pros and the cons now every tactic in every strategy from
branding to football needs consideration if you were to make a strategic decision on promotional
pricing in a silo it would be easy to assume that if it's effective and it drives sales
then it's a no-brainer you should use it all the time but there are bigger implications at play
let's take a closer look at some of the advantages and disadvantages of promotional pricing now just
before we do if you have any questions drop a comment below and of course if you like this video
hit the like and subscribe and the notification bell will let you know when i have new videos
just like this one so here are some of the more compelling reasons to use promotional pricing as
part of your pricing strategy advantage number one increase in sales and revenue so this is the most
obvious advantage of running price promotions and that is the injection of sales and ultimately cash
into the business whether the additional revenue is helping to pay the bills or to boost the
profits of an already impressive year revenue and profits are the lifeblood of any successful
business advantage is number two urgency drives action now the law of scarcity is essentially the
fear of missing out and robert kieldini goes into this in great detail in his book influence the
psychology of persuasion so if you haven't read that i definitely recommend that you check it out
but the nature of price promotions is that they're time-bound so they're inherently scarce a
promotion price and strategy that's not tom bound won't have anywhere near the impact of one that is
driven by the fear of missing out buyers are driven to take action now to look at the value
that's on offer before it's gone before it's too late advantage number three value perception
favors the buyer now when we go shopping for something consciously or subconsciously
we want to see some kind of value and that's why discounted buyers on higher volumes work
well even though the price is higher it lowers the average cost per item increasing the value
to the buyer now even wealthy shoppers with no restraints looking towards the top shelves of the
supermarket or looking down high street they don't want to be taken over the coals in other words in
one way or another we all want to see some kind of value and promotional pricing leans the value
in favor of the buyer increasing the willingness to purchase advantage number four is an edge over
the competition so when it comes to products in direct competition with each other pricing
promotions offered the discount of products a competitive advantage all things being equal were
more likely to buy an identical product that's discounted than one at full price and even if this
competitive advantage is short-lived it can impact the sales and revenue of the brand on promotion
but also its competitors as well advantage number five greater volumes equals greater buying power
now brands that understand their price promotion strategy in great detail through extensive
research can predict with a certain degree of accuracy the likely impact of sales volumes
now this puts a lot more power into the hands of those kinds of businesses allowing them to source
materials in higher volumes and at lower prices ultimately reducing their cost of production per
unit now of course this is offset with a reduction in the price per unit sold but in the lifetime
value of a customer that may be valuable to a certain brand and they may be willing to make
that trade trade-off for the business knowing that by holding on to the customer long term
they will profit over time now as always with any strategic decision the disadvantages of a
given strategy or tactic must be considered and when it comes to branding and pricing promotions
there are a few important disadvantages that you really do need to take into consideration
disadvantage number one brand perception and loyalty now the most important factor to consider
with pricing promotions is the impact that it has on the brand's perception in the market as
well as customer loyalty brands that operate with regular price promotions can negatively impact the
relationship that it has with customers on both ends of the price scale customers who purchase
the brand's products at full price may very well feel cheated when they see the same products on
offer at a discounted rate shoppers at the low price point on the other hand will feel
disgruntled when they want to make a repeat purchase and they've seen that the price has gone
up so both sets of customers will likely feel less loyalty towards the brand affecting the brand's
overall perception in the market disadvantage number two price perception and cannibalization
so brands that leverage price promotions regularly are sending consistent messages to
their audience and their audience is listening the brand message that they send is this we'll
be back soon with another promotion quite soon and repeated discounts and promotions really do affect
the price perception of a brand's products and that impacts sales outside the promotional period
so in other words customers become trained to wait for promotions rather than to pay the
regular price outside the promotion disadvantage number three are price wars now price wars are a
well-documented side effect of price promotions especially in highly competitive marketplaces
now as we've covered earlier discounts offer brands a short-term competitive advantage
which may result in the competition responding with their own lower discount when brands go
toe to toe on price promotions it can quickly become a price war which impacts the profits
of not just the brands at war but the entire industry as well so in price wars there really is
only one winner and that is the customer now when it comes to pricing your products and services and
setting a price perception in the market for your brand there are many strategies that you can use
some will give you a quick hit of dopamine and a healthy injection of funds to your bottom line
but will cannibalize your efforts long term others will be a slow burn and take some time to gain
traction but could garner some brand loyalty in the long run so you need to understand your
market understand your competitors understand your long-term position and price accordingly now if
you want to learn more about pricing strategies and you want to see some types and examples then
my next video will help you out until next time brand like a master and i'll see you in the next
video you