Promotional pricing can help stimulate consumer interest and early purchase. It can also encourage the hesitant or unwilling to go ahead and buy. Here we outline several promotional pricing techniques.
- Special event pricing: To draw in more customers, sellers often discount prices for “special events” such as boxing day. Another example are the back-to-school sales every fall.
- Loss-leader pricing: Department stores, pharmacies and supermarkets commonly drop prices on well known brands or specific products to stimulate customer traffic. Sometimes prices are even dropped below cost. The hope is that the increased traffic will generate sales of other products and help promote the store.
- Low-interest financing: Commonly used by automakers, low interest or even no-interest financing is used to attract customers instead of cutting prices.
- Longer payment terms: Extending loans over longer periods of time to reduce customer monthly payments is a technique often used by mortgage banks and auto companies. Consumers often think in terms of what they can afford monthly, which can make this technique particularly effective.
- Warranties: A common technique is adding a free, or low cost warranty to help increase sales.
Discounts from normal prices are legitimate however avoid using illegal techniques such as artificially raising prices in order to offer a larger discount.
Promotional pricing can be effective for a while but it is usually not the best long-term strategy. If it doesn't work, you end up wasting money that could have been used for better marketing campaigns. When it does work, it's copied by competitors and loses its effectiveness.