Have you ever done the math to determine what it takes to make as much money discounting as you make at full price? It's a fun exercise.
In this example, 10% off works if sales increase by at least 10.1% over full price.
Then 20% off works if sales increase by at least 14.3% over 10% off.
Then 30% off works if sales increase by at least 22.5% over 20% off.
As you approach the limits of your cost of goods, the percentage increase required to make as much money increase exponentially.
40% off works if sales increase by at least 42.9% over 30% off.
50% off works if sales increase by at least 150.3% over 40% off.
As 2017 winds to a close, we're learning that we've pushed % off as far as we can push it.
So if the tactic has been pushed as far as it can, one of four things must happen.
- We have to lower cost of goods sold to allow us to discount more.
- We have to increase list prices to allow us to make the customer think 50% off is an even bigger deal, or that 60% off is a good deal.
- We have to increase merchandise productivity.
- We have to find new customers at low-cost / no-cost.
We already know which tactic we'll pursue (1/2).
We already know which tactic provides prolonged success (3/4).