Imagine browsing for a specific product online. You find it with a 20% price drop and immediately hit the “Buy” button. Later, you happen upon it somewhere else. That new place offers it at the same price, without a discount.
You realize that’s the regular price, and the discount hasn’t been authentic. But instead of searching for it elsewhere, you bought it immediately. That’s the power of any price drop, even fake ones.
A price drop is a strategic tool you can implement at any moment in your marketing to help sell more. Price drops boost conversions, help customers decide quickly, and can boost customer engagement when done right.
Doing them right is what we’ll be talking about today!
Understanding the Psychology Behind Price Drops
A business can’t achieve sustainability if it constantly relies on discounts and price drops. That’s because a small percentage of customers are bargain-hunters and price-buyers – 15% to 20%, depending on the niche (Mark Wickersham).
In fact, if you constantly rely on discounts, you’ll create customer habits and specific associations. Constant discounts might suggest products or services of lesser quality. Why else would they need to be constantly discounted?
A well-executed price drop, on the other hand, can nudge customers to perceive your goods or services as more valuable. View them as bargains they shouldn’t miss out on. That way, you can foster positive associations and improve the audience’s trust in your brand.
That’s because discounts and price drops greatly influence consumer perception. They’re a promise of savings and a sort of exclusivity that’s limited in time. Not to mention the FOMO effect they might have.
You want to take advantage of that exact psychological impact.
Below, we’ll discuss the implementation of price drops in a strategic context, so keep reading if you want to sell better than girl math!
Strategic Implementation of Price Drops
As mentioned, you can’t rely on price drops all the time. Certain intricacies will make their application more efficient. That includes:
1. Timing: Identifying the best time for price drops
That’s one of the key factors influencing efficiency. Businesses depend on various consumer behaviors, business cycles, seasonal or holiday trends, etc.
You might want to motivate customers with substantial price drops for Black Friday. Or help clear your inventory when times are slow with carefully scheduled and time-constrained discounts.
When you carry out price drops strategically, you increase product visibility and exposure and, in turn, boost end results. But timing isn’t the only defining factor.
2. Target Audience: Tailoring price drops to specific customer segments
Not every buyer is a bargain-hunter. Some prefer value, and a sudden price drop might push them away as customers.
That’s where segmenting the audience comes into play. When using all-in-one marketing platforms like VibeTrace, you can gather all the valuable client information in one place. That allows you to create specific segments of the customers that will react best to a price drop.
Examples include:
- Customers who have abandoned products in their shopping cart on the regular;
- Customers who have abandoned the checkout process for no apparent reason (like bugs or sky-high shipping costs);
- Customers with specific purchasing behaviors – let’s say you have historical evidence that some customers buy mainly discounted products;
- Customers in specific locations or with specific demographic characteristics like income and education, etc.
Carefully identifying key segments for your business will inform your price drop activities and overall marketing. Segmenting customers promotes better allocation of efforts and resources, so don’t underestimate this step – a chunky price drop of 50% won’t work the same for everybody.
3. Product Selection: Choosing the right products for price drops
Choosing the right products for a price drop matters as much as choosing the right audience to target. That’s where your knowledge of the market comes into play.
Is the competition intense? Are customers likely to get a product at a better price point somewhere else? Has that been a product that sells well without discounts, or has it struggled?
When choosing the products to discount, consider the following:
- How sensitive are your customers to changes in the price? Products with high demand elasticity are more suitable for price drops and might benefit more.
- How would the price drop impact your results? Since a price drop means cutting the profit margins, choose a product that will sell well and offset the smaller margins.
- How have you positioned your brand? If you’re a bargain brand, more products might benefit from price drops. If you manage an exclusive brand, exclusive price drops are in order.
Consider these factors, and you’ll see that there are three major categories of products you can discount:
- Products in High Demand – if you have highly sought-after products in your inventory, you can capitalize on customer interest with price drops;
- Products at the End of their Life Cycle – old collections, older models, anything that can go out of fashion can be quickly cleared out with price drops that help streamline your inventory;
- Products Perceived as Premium – price dropping those can boost perceived value and increase the audience you attract. Just beware, unreasonable price drops might alienate value-buyers.
4. Competitor Analysis: Understanding market trends and competitor pricing strategies
That’s the last ingredient for the successful implementation of price drops in your strategies. That includes:
- Analyzing competitor marketing strategies for adapting to the ever-evolving customer behavior, including buying patterns and market shifts. It helps you discover market gaps you can fill with your product offers.
- Analyzing competitor pricing strategies – from pricing models to the discounts (fake or real) they use to attract more customers. You can compete through promotions, product bundling, loyalty programs, etc.
- Considering competitors’ positioning in the market – do they rely on value propositions or constantly running promotions, are they the bargain-buyer’s favorite spot, and where can you fit, in comparison?
All that helps you carve out a place for your offers and price drops. Below, we’ll see where and how you can carve that spot.
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Price Drops in Different Marketing Channels
Different marketing channels speak different languages – you know that if you’re practicing omni-channel marketing communications. That means you’ll have to communicate price drops in different ways.
Here are your lead channels with examples of how to communicate price drops on them:
1. Online Retail: E-commerce strategies for price drops
The online store provides immediacy and accessibility. It’s a stage that allows flash sales, limited-time offers, coupons, and pop-ups. You can use different tactics to prevent people from abandoning carts and the checkout process, including through one-time price-drop offers.
2. Email Marketing: Using ‘price drop’ notifications to re-engage customers
While strategies applied on your website target all visitors, email marketing can be laser-focused. You can target specific segments and personalize communication. You can even offer exclusive, limited-time price drops for the products people browsed or left in their cart.
You can even suggest new ones that suit them best based on purchase history – that’s where a product recommendations engine can make a huge difference. You can use email marketing to deliver highly personalized incentives to the right people at the right time, including price drops.
3. Social Media Marketing: Creating buzz and virality through price drop announcements
Social media is where you can find the entirety of your audience – current and potential customers. They present a unique opportunity to create buzz and announce planned or present price drops.
You can boost your price drop campaigns with the help of engaging visuals, interactive and shareable content, user-generated content, and even influencer collaborations. All that can contribute to the momentum of a price drop campaign and boost your visibility by reaching people even outside your following.
4. Traditional Retail: In-store promotions and signage
We’ve all seen those giant, juicy 50-70-80% OFF signs, clearance announcements, and SALE SALE SALE stickers peppering shop windows. If you have a physical location, don’t be shy to loudly announce price drops and in-store promotions.
Physical stores come with tactile sensations that help with persuasion. That includes display arrangements, lighting, and even smells. I’ve been into stores that loudly proclaim discounts on their shop windows but then make you walk through the displays for all the new and expensive goods before you get to the discounts.
There’s a whole science behind merchandising that helps entice customers to spend more. Remember, people might walk in for the price drops, but that’s an opportunity to make them walk out with more than just the discounted goods.
Measuring the Impact of Price Drops
Price drops can have a profound effect on marketing and a brand’s performance. But measuring it is what most marketers and store owners trip over. Here’s what you can do to measure that impact efficiently and understand whether price drops make sense for your business:
- Sales Performance – carefully examine sales data before and after implementing a price drop. Consider revenues, units sold, and average order values with and without discounts. One way to get clean data is to implement a price drop outside peak selling season and compare the results to a similar period without a price drop to put them in context.
- Customer Acquisition & Retention Rates – consider the number of new and returning customers before, during, and after a price drop campaign. That will help you determine whether such a strategy impacts the usual influx, retention, and loss of customers.
- Impact on Brand Perception & Loyalty – keep your ear to the ground during a price drop experiment. Such a campaign can boost visibility and engagement but can also be detrimental to brand perception. Send out surveys and embed feedback loops so that you can gauge your audience’s reaction to the price drop.
- Analytics & Tools for Measuring Success – utilize web analytics tools and platforms to gather data, use UTM tracking to attribute results, and estimate the conversion rate of price drop campaigns. Instruments like VibeTrace help you aggregate data and have everything at your fingertips.
When you measure the efficiency of price drop campaigns, don’t forget to put the results in perspective, as we’ll do in the next section!
Balancing Profitability and Attractiveness
Pricing strategies can be tricky. They factor in the cost of selling goods and services, the margins you wish to earn, and even markup. Which strategy gets applied can wildly vary from business to business. Price drops can be suitable for implementation in almost every pricing strategy.
But you must be careful when applying them. First, you want to maintain profitability. If the price drop is so steep that selling more units can’t offset it, is it worth it?
Second, regular price drops might affect your business on several accounts, including reduced profitability and lowered perceived value. Don’t forget that price points are often associated with quality. Too many and too often price drop campaigns might make you look like a cheap brand.
If you give price drops rarity, you make them exclusive and anticipated. And that prevents negative long-term implications for your brand and product value.
Below, we’ll check out several examples of price drop campaigns to see how some of the best did it. Don’t miss them!
Innovative Examples of Price Drop Campaigns
Carrying out a price drop campaign might sound straightforward, but there are lots of moving parts to consider. Here’s how some big brands leverage the potential of such campaigns:
1. GoPro’s Price Drops
A GoPro isn’t something you can buy or afford just for fun. It’s not something you’d buy without proper research first, either. In that case, just the promise of a price drop won’t be enough.
That’s why GoPro doesn’t waste time with percentages and price points colored in red. Instead, they focus on the desired features and the promise to acquire them at a new low price.
What to learn from the approach? If you’re trying to boost the results of a high-end product, don’t focus so hard on “how much” but on the exclusivity of such rare price drops and the benefits they can provide.
2. Goop’s Sale Page
Goop, another premium brand, focuses on the user experience. UX is just as big a part of the user journey as the price point at which they can get a specific product. Instead of peddling a relative discount – 5%, 20%, 90%, they show the absolute discount on a dedicated Sale page.
They displayed the products with both current and discounted prices. That provides a clear picture of the price without distractions and without making people calculate the discount themselves.
What to learn from the approach? Such a dedicated Sale page helps you separate discounted products and gives bargain-hunters and price-sensitive buyers a spot where every offer will be of interest. Thus saving them additional time on browsing and further improving the UX.
3. KitchenAid’s Approach to Price Drops
KitchenAid has mastered the price drop game. When you visit their website, you can navigate to dedicated product bundles that don’t display the discount. Instead, they show how much customers SAVE when purchasing specific bundles.
What to learn from the approach? That’s another way to leverage price drops to increase the perceived value without harming the brand’s reputation. If you want to cross-sell or clear out inventory, you can create bundle offers that present the price drop as a benefit.
4. CreationWatches Stand Out Visuals
The thing about price drops is that they might look cheap and desperate. It might give the impression that what you’re selling isn’t very good. When customers doubt the quality of your products, that harms the brand’s reputation.
That’s what CreationWatches manages to avoid in their price drop email campaign. It’s not just a sale announcement. It uses high-quality visuals that remind people of the watches’ quality while incentivizing them to purchase immediately.
What to learn from the approach? No matter how cheap or pricey your products are, you can use visuals to manage customer perceptions.
5. Bed, Bath & Beyond & Being Straightforward
Just as a Sale page makes it clear customers can find deals, don’t waste customer time in your email campaigns. Check out this Bed, Bath & Beyond email – they don’t beat around the bush and lead with a clear CTA to join their end-of-the-year clearance.
What to learn from the approach? If you’re initiating a price drop, state it at the top. Be straightforward. Be specific – how can clients take advantage of different promotions, shave off unnecessary steps, and give them a one-click solution.
But if we weren’t checking out specific campaigns, here’s what you can do to make your price drop campaigns attractive and make them work in your favor:
- Highlight features and benefits customers will get if they take advantage of a price drop;
- Apply personalization through dynamic pricing, dynamic web content, email offers, and wherever possible, to sweeten the deal;
- Make discounts user-specific to promote customer loyalty;
- Use clear CTAs, drop the small font, and don’t hide essential conditions for getting the price drop – make the user experience and the user journey as smooth as possible;
- Drop prices on similar but higher-end products (to upsell customers) or complimentary ones (to cross-sell them);
- Show absolute discounts, not just relative percentages;
- Indicate how much customers can save if they take advantage of a specific deal – a bundle or a sale price;
- Don’t create confusion by dropping the prices of too many alternatives.
Coupon Marketing Strategy
We have a detailed article on how to use coupons in your marketing strategy.
Learn your lessons now, and you’ll help your brand shine when reducing prices.
But we know inspiration’s not all. That’s why below, we’ll discuss how to improve your price drop strategies with the help of technology and shifting market trends.
The Future of Price Drops in Marketing
The evolution of marketing technology has seen us through automation all the way to AI integration. Such technological advancements and their continuous development affect price drop strategies, as well.
Today, you can use automated email marketing to lead recipients to exclusive price drops. You can leverage all-in-one marketing platforms like VibeTrace to analyze big data and create predictive models. E-commerce platforms like Shopify offer apps to send out automatic alerts for price drops or offer one-time price-reducing deals to prevent people from bouncing.
All that, plus trend-setting market dynamics, requires marketers to stay on their toes and be flexible when responding to shifts. Price drops will stay in trend. What needs to constantly evolve is marketers’ attitude.
As a result, businesses must become agile and proactively adjust their pricing strategies to stay competitive.
To Price Drop or Not?
Every business has applied price drops at some point or another. Today, most e-commerce sites have dedicated SALE sections to indicate and separate products with lowered prices.
The strategic use of price drops can expand the client base, streamline inventories, and improve the way customers perceive the value of your goods and services. If you have robust instruments for customer segmentation and marketing automation like the ones featured in the VibeTrace platform, start using price drop strategies in your marketing with confidence!
