Offers and Promotions beneficial for your Business
“Lowering prices is easy. Being able to afford lower prices is hard.”
When and how to reduce the prices of your products or services without affecting the financial stability of your business or your brand image?
While many of the promotional techniques used by large corporations can be applied to your smaller business, there are some additional risks related to the company’s financial capacity and the profit margins involved. These are critical and must be carefully considered when deciding to offer a deal or promotion to your customers. This is because your resources are far more limited than those of big corporations.
According to the sense in which we will use it in this article, an offer is:
“Putting a certain product up for sale at a reduced price.”
And a promotion is:
“A set of activities aimed at publicizing something or increasing its sales.”
In this sense, we will refer to Offers and Promotions as the offering of an economic incentive to the customer, either in the form of a discount or by providing additional benefits as a gift.
Offers and promotions aim to encourage purchases in order to increase sales. They are characterized by having a defined, generally short, duration.
Offering discounts without killing your profitability
When you offer deals and promotions, you either lower your prices or give things away to your customers. In both cases, this means an added cost (gift) or a reduction in your profit margin (discount). And in both cases, it results in a reduced margin.
However, if well-controlled and monitored—without completely losing your profit margins—a promotion or offer can benefit your business on a one-time basis, mainly because the basic and fundamental goal of a promotion is to increase short-term sales.
Profit is always sacrificed in a promotion, but this loss of profitability might be offset by a significant increase in sales.
To control the effect of the promotion or offer on your profitability, it is important to do a detailed analysis of all the cost increases that the promotion will entail and the margin you will no longer earn. With these two elements in hand, you must recalculate your price and ensure that the offer price allows you to maintain a certain level of profitability—or at least, that it doesn’t result in losses.
Setting a goal for your Offer or Promotion
As we just mentioned, the general objective of a promotion or offer is to generate a short-term increase in sales. However, when you decide to offer a deal or promotion to your customers, there are other more specific and strategic goals you might have in mind. For your promotion to be successful, you must know exactly what goal you're pursuing with it.
Some possible objectives of an offer or promotion could be:
Clear out inventory due to season or collection changes.
Support the launch or relaunch of products or services.
Generate consumer preference for your brand.
Acquire new customers.
Increase brand awareness.
Create more closeness with your customer.
Counteract competitor actions.
Only if you clearly define what goal your promotional effort is targeting will you be able to later measure the result and validate whether it was met.
Remember, when defining your promotional goals, it’s helpful to use the SMART objective criteria: Specific – Measurable – Achievable – Realistic – Timely. You can find more information about SMART goals in another resource from this section: The Annual Plan.
Developing a Plan
Each promotion should follow a plan that defines its duration and the budget allocated to it.
You should not improvise promotions or launch discounts hastily without assessing their impact.
As we’ve mentioned, by definition, a deal or promotion has a set duration. When you decide to offer your customers a deal or promotion on a product or service, it’s a good idea to prepare a plan that includes the following information:
General sales goal (% increase or specific volume to achieve)
Specific objective justifying the offer
Target audience
Products or services included
Type of promotion or offer
Start date
End date
Promotion channels
Budget
You can download a simple format below to help you with this process.
It’s best If your Offers and Promotions are specific
You don’t necessarily have to apply your deals to all your products or services. It’s better to select those that make the most sense for your plan and the strategy behind it.
It’s also essential to define and select the customer segment to which this particular offer appeals.
The more specific your offer or promotion is, the better your chances of offering an economic and emotional benefit that is attractive to a particular customer segment, increasing the likelihood that they’ll feel motivated to buy.
Remember the saying: “Jack of all trades, master of none.”
Evaluating the Result
Since deals or promotions have a short and specific duration, it’s relatively easy to evaluate their results. You can initially check whether you met your sales objectives and confirm whether your specific goal was achieved or not.
Use the insights gained from the results to improve future promotions by repeating what worked and adjusting what didn’t.
Consumer Psychology in Offers
The fact that offers or promotions have a specific and usually short duration works in our favor when it comes to consumer psychology. It creates a sense of urgency that strongly drives the purchase decision.
This sense of urgency increases the power of the promotion, prompting the customer to act quickly to avoid missing out. This is known in English as FOMO (Fear of Missing Out). If the deal is attractive, as the end date approaches, it will further motivate the customer to purchase the product or service—especially if it holds significant value for them—because they won’t want to miss the opportunity.
Types of Attractive Offers and Promotions for Your Business
Price Promotions. These include all deals involving a discount on the regular price of a product or service. The customer receives direct economic savings compared to the regular price and the price the product will return to after the promotion. Examples include:
General discounts applied to a product/service for a set time, with no conditions.
Volume discounts, where you must buy a certain amount to get the reduced price.
Pre-launch deals with lower prices for those who take the risk of being the first to buy.
First-time purchase discounts to encourage new customers.
Discounts in exchange for customer data or loyalty—e.g., signing up for your mailing list or referring friends.
Discounts based on point accumulation, where loyal purchases are rewarded with redeemable points for future discounts.
Gift Promotions. These include all offers where the consumer gets an additional product, service, or benefit when they buy, even if they pay the regular price. Examples include:
Giving more of the same product or service at no extra charge.
Including a different product or service as a gift—this could be related or completely different but attractive to the target audience. It may be something from your own business or from a partnership.
Free shipping or delivery (covered by your business). Instead of the customer paying for it, you absorb the cost and offer it as a courtesy during the promotion.
Raffles and Games. These are promotions where buying the product/service gives the customer a chance to win a prize. While fun and interactive, they can be less effective because the benefit is not guaranteed, which may lower motivation to purchase.
Important Considerations When Offering a Promotion or Deal
Here’s a checklist to help you optimize your promotion’s success:
Prices, discounts, and gifts must be believable and attainable.
Communication should be honest and transparent. Never mislead your customer with hidden conditions or costs.
Show the original price, so the value of the deal is clear.
Provide real value. The discount or gift must be genuinely appreciated by your target audience.
Make it easy to access. Don’t confuse or frustrate the customer with complicated mechanics.
Don’t extend the promotion. Once you announce the end date, stick to it. This builds credibility and maintains urgency.
Avoid running two promotions at once. Even with different products/services, overlapping deals can confuse customers.
Don’t overdo promotions. If you run too many, customers may only buy during discounts.
Never sacrifice product or service quality just to offer a deal. Don’t protect your margin by cutting costs that harm the customer experience.
Final Thought: Remember that a deal or promotion is not a fix for a bad product or service. If your product isn’t selling because it doesn’t meet consumer needs, an offer will only damage your credibility and brand image by exposing more people to a flawed product or service. In that case, the solution is not a discount—it’s to review and improve your product or service.