Introduction
Discounting strategies are a cornerstone of retail, often used to tackle challenges such as slow-moving stock, inventory clearance, or customer acquisition. While discounts can drive sales, they require careful management to balance inventory goals with profitability.
Discounted products—those priced lower than their original selling price—are a valuable tool for resolving stock imbalances, avoiding deadstock, and even attracting new customers. However, managing them effectively is crucial to protect margins and achieve business objectives.
Setup
Understanding how much of your inventory is discounted—and the associated advertising spend—is vital for strategic decision-making. Discounted products deserve special focus when:
Clearing old stock before a new season.
Maximizing the remaining profit margins.
Controlling promotional timing to meet KPI targets effectively.
Define the discount threshold in %:
A critical first step is establishing the percentage difference between the original price and the sale price, using both fields in your product inventory feed. This calculation will help you segment and monitor discounted products accurately.
Analyze discount percentage using discount bucket in Product Analytics.
How to Segment Discounted Products
Discount Percentage is the attribute available in the Product Analytics which can be used in the filters for creating discounted Product Set/Group.
Best Practices
Promoting discounted products can boost sales but may come at the cost of reduced margins. To ensure profitability:
Focus on Overall Profitability:
Measure not only the discount's impact on ROI but also the additional cost of advertising.
Consider if you're selling at a loss despite hitting sales goals.
Weigh Discounting vs. Marketing Investment:
Compare the loss per discounted sale against the potential ROI from reallocating the same budget into promoting other products.
Ask yourself: Is it better to lose $20 per discounted sale or invest $20 in promoting higher-margin products?
Monitor Margins:
Report the true margin after accounting for both discounts and advertising costs.
This visibility can help refine promotional strategies.
Adopt a Consolidated Strategy:
Influence discounting decisions: Channel potential markdown losses into targeted marketing.
Reduce promotion of deep discounts: Avoid promotions that excessively dilute margins.
Strategic step-by-step approach: Use a phased plan for discounting and promotion to prevent deadstock effectively.
By leveraging these best practices, you can turn discounted products from a margin challenge into an opportunity to optimize inventory and sales performance.