Promos: how to devalue a product really fast
Over the past couple of days, I’ve received a few marketing emails that was offering me great discounts and promos. This got me thinking that many companies are just great at diminishing the real value of their products by having a disorganized, badly planned schedule of discounts and extensions of promos. Well planned and organized promos that fit within a global strategy do have some value, but you need to follow a few strict rules.
Promos need a hard time limit
If you keep extending your promos again and again, you basically create a behaviour by which most customer will just wait until the next promo comes in before buying your software. It does not take much for a customer base to understand that you usually extend promos; so they do not necessarily feel the rush to go and buy before the deadline. No matter what, pick an end date to all your promos and stick to it.
Move away from cyclical or calendar based promos
Again, you want to prevent behaviours that make consumers wait for the next promo to arrive. So if you have a bad habit of having end of month/quarter/year sales, you are teaching your customers to wait for a given time. This also applies to making your sales quotas; linearity of sales should be more important than making your numbers. I know a few companies that basically went bankrupt because their customer always waited until the last days of the year to make the big purchases – getting this way the best discount possible. If you want to make such a promo, make it well focused (back to school for example), short enough (black friday sales) and do those rarely.
Discounts don’t need to be that steep
I often see 20-30% discounts (and sometimes even more) on software products. While these have very low COGS and high profit margins, it is not an excuse to go that deep on discounting. Sometimes just a 10 to 15% discount can go a long way. If customer need that of a deep discount to justify buying your product, perhaps your product is not well priced. A promo or discount should be just a little push in order to help the laggard make a buying decision.
Never have a promotion page on your web site
Once in a while you see companies having a permanent promotion tab on their web site. I believe that this is a really bad idea; it shows how much you use promos to drive revenue. Unless I really need to buy your product today, I will just bookmark this page and wait for the right discount to arrive. And since this becomes a widely used behaviour, the discount will indeed come; with sales not coming at the right level (again focus on linearity, not on sales quotas).
Never discount a product at launch (or even before)
I never liked pre-launch and on-launch product discounts. As you release a new product, this is where your customer base should be willing to pay the highest price (assuming your pricing is fair of course). Discounting from the get go just means you are telling your customer: “please disregard our standard pricing, they are bloated and know about it”. Announcing a new release should be exciting enough that your customer want to buy it; if it’s not the case, maybe you want to sit down with your product management team.
If you seeing yourself do some or all of these bad behaviours, you are ultimately hurting the product value and actually leaving money (i.e. better margins) on the table. Be smart about promos and make them fit within a global and well thought out strategy.