How much should you discount for Black Friday?
To help you determine what discounts are best to offer as a startup or small business for Black Friday, we asked marketing professionals, startup founders and business leaders this question for their best insights. From giving discounts in dollar amounts instead of percentages to offering a 15% minimum, there are several tips that should guide startups and small businesses in deciding the best discounts to offer on their products and services for Black Friday.
Here are 11 tips these small business leaders follow in pricing discounts for Black Friday:
- Give Discounts in Dollar Amounts Instead of Percentages
- Offer a Special Offer or Service Not Available the Rest of the Year
- Bundle Existing Offers
- Offer At Least 50% Off to Reward Existing Customers and Win New Ones
- Consider Your Margin and Audience as Well as Your Competitors to set Your Discounts
- Offer Discounts Based on What You’re Trying to Accomplish
- Let Your Discounts Not Exceed 20%
- Offer Something Over and Above the Usual But Within Your Profit Margin
- Create Contingency Plans
- Build Anticipation Around Your Discounts of 20 to 30%
- Offer 15% at a Minimum
Give Discounts in Dollar Amounts Instead of Percentages
It is a bit of a fallacy that percentage discounts bring in more customers. Research shows that customers are driven by the dollars discounted rather than percentages. A startup or small business should have campaigns like “$2 off every item on this table” or “buy more than $200 and we’ll discount $25” to bring people into the store.
Percentages may work when you are talking about large volume customers like B2B customers. Business clients understand and work with percentages all the time so they aren’t put off by them.
Offer a Special Offer or Service Not Available the Rest of the Year
Typically, if a business gives a 10% discount they may have to sell up to 50% more just to make the same profit. Yet, often people won’t get excited about a discount unless it’s 40% or more. So, think very carefully about discounting, especially, because discounts can train your customers to wait for sales to buy!
What is often a better approach is to have special offers of a product or service that aren’t available the rest of the year. Not only does this not cannibalize your sales, it won’t devalue your usual offering. For example, this Black Friday, I’m launching a different business coaching program with an interesting pricing model. The price goes up after each person who buys and there’s a maximum of 10 places. This program is structured differently from how I usually operate, with unlimited short ‘laser’ coaching sessions for a whole year. So different offers, different pricing strategies. Find a way to apply this thinking to your business.
Bundle Existing Offers
Before deciding to offer a discount for Black Friday, you may want to consider the advantages and disadvantages of offering a discount. Two common concerns include the reputation of your brand being undervalued, or customers creating a habit of waiting until you offer a discount or sale before making a purchase. As you determine whether you should discount for Black Friday, you want to also consider your competitive advantage; your sales and profit goals; and the cost or benefit of offering a discount. As a service-based business owner with an e-Learning academy, another alternative to discounting is bundling existing offers or a BOGO special that allows our customer to get a great deal and your business meet their holiday and quarterly sales goals.
Offer At Least 50% Off to Reward Existing Customers and Win New Ones
Sales events happen all the time. Even significant sales and discounts happen regularly throughout the year, whether it’s Memorial Day, President’s Day, or for other holidays, anniversaries and celebrations.
Black Friday happens once per year. It’s the one day, one moment annually when pre-existing expectations among not just existing but also potential, new customers is at a huge high. It’s the day many look forward to, and save up for, as their chance to purchase that thing or multiple things that they’ve been staring at for months. It’s also the day that people often don’t even know what they want to buy, but if they see the right deal on the right item(s), they’re ready to spend.
For small businesses and even startups, Black Friday is not your chance to sell more stuff, it’s your opportunity to reward existing supporters and customers and acquire new ones…and you need to approach it as such. Offering 50% off (or more) enables you to rise above most of the day’s other noise.
Consider Your Margin and Audience as Well as Your Competitors to set Your Discounts
When it comes to Black Friday, there is no one-size-fits-all answer for how much to discount. However, there are a few general principles that can help guide your decision.
First, it’s important to consider your margins. Make sure that you are still making a profit even after the discount is applied. Secondly, think about your target audience. What are they looking for? How much are they willing to spend? This will help you to determine what type of discount will be most effective in attracting customers.
Finally, consider the competition. What are other businesses doing? How can you make your discounts stand out? By following these guidelines, you can ensure that you are offering the right discounts for your business on Black Friday.
Offer Discounts Based on What You’re Trying to Accomplish
I think it depends on what you’re trying to accomplish. If you’re looking to get people in the door and have them buy something, then I’d be inclined to discount more aggressively. I’d probably start at 50% off, and then increase the discount as the days go on. If you’re looking for a more sustainable brand image, though, I’d recommend starting with a very modest discount (say, 10% off) and seeing how that goes. If it doesn’t work out well for you, then try increasing your discount over time. If it does work out well for you, then continue with a modest discount throughout Black Friday week and into Cyber Monday.
Let Your Discounts Not Exceed 20%
Any small business trying to make a bountiful out of black Friday can do so by having discounts not exceeding 20%. The percentage pricing sets your small enterprise on a course to make a profit since it ensures that your end price does not go below the initial purchasing prices offered by suppliers around that time of the year. Keystone pricing is the best practice for small startups trying to turn a profit during the festive season. It is a model that ensures that the products are priced according to the purchasing price and the discounting based on a point that it does not lower the selling price beyond a set limit.
Offer Something Over and Above the Usual But Within Your Profit Margin
Generally, during Black Friday, a brand will want to run its biggest promotion or discount of the year. So if you usually offer 20% off for a sale, go for 25% and 30%. Consumers expect this. Of course, profitability is key and you’ll need to consider margins before implementing discounts that are too deep, but Black Friday should offer something over and above the usual. One great tip is to research what competitors did last year in terms of deals and discounts too, so you know what to expect this time around.
Create Contingency Plans
If Murphy’s Law is anything to go by, anything that might go wrong will most likely do so at the worst time. The best thing you can do is keep your cool and create a contingency plan to tackle unexpected surprises. Your first step should be identifying as many eventualities as you can conceive, such as selling out of an item, customer complaints, sick personnel, an emergency situation, server meltdown, etc. From there, it’s all about sitting down with your team and brainstorming the possible solutions which will enable you to overcome any obstacle you may encounter.
Build Anticipation Around Your Discounts of 20 to 30%
Make sure that the discounts are significant enough that people feel like they’re getting a good deal, but not so steep that they cut into the profits too much. I’ve found that offering a discount of 20-30% off is usually a sweet spot for most people. However, whatever amount you are offering just be sure to build anticipation around it. I do this by releasing teaser content in the days leading up to the big event.
I’ll post a photo of the product on social media with a note about the discount that will be available. I’ll also send out an email blast to my list with all of the details about the sale. On the day of, I make sure to post reminders on social media and send out another email blast. I’ve found that this approach helps to generate excitement and ensures that people don’t miss out on the savings.
Offer 15% at a Minimum
Don’t rely on 10% discounts as a way to boost your sales. Most people don’t react to 10% because the difference between full price and 10% off feels like peanut money.
I once attended an event at a cigar shop and an employee was telling the crowd inside the store that he was offering a one-time 10% discount for a top-of-the-line brand. There weren’t many takers, perhaps none. In fact, one guy blurted out, “For a 10% discount, I wouldn’t even walk across the street to buy it!” The room fell into a moment of awkward silence and the man probably regretted saying that, but it did teach me a lesson.
You won’t get far offering 10% discounts, even if you’re dealing with motivated buyers on Black Friday. They’ll just move on to something else with a more enticing price tag. Ten percent doesn’t make a dent. Set the floor at 15%.