So, its early October – why are we talking about January now? If you are to execute a very successful promotional period in January, you’ve got 10 weeks to be fully prepared to launch one, and there is much to do.
Should I run a January sale?
Many retailers are a little circumspect or even hostile to the notion of running a sale, often for one or several of these reasons:
- They view a sale as inherently dishonest and therefore not in keeping with their brand values.
- They view a sale as only being suited to retailers at the lower end of the market.
- They view a sale as risking margin erosion without increasing turnover.
Due to these concerns, a retailer we knew had not previously participated with January sales activity. However, the first year they partook, sales in January increased year on year from £330k to over £750k – including ten kitchens with ex VAT sale prices over £30k and one over £100k.
Sales can work for all retailers regardless of market positioning, but success depends on diligent planning and execution. Here are some tips:
How to fund discounting
Returning to the list above, many people view sales as dishonest because they don’t believe the original sale price. So, how can you offer a genuine discount to ensure what you are offering is of real value, without smashing your margin to pieces? Like this…
Talk with your suppliers in advance and get their buy-in. Most retailers have, at some point, attempted to negotiate better prices with their suppliers only to find they are fixed in rigid structures, so rarely do such discussions succeed. However, negotiating a time-specific, mutually beneficial promotional arrangement is a different thing altogether.
I can assure you from first-hand experience it is possible to agree on special promotional terms for a January Sale with suppliers like BSH, Miele, Häcker, Cossentino and Blanco amongst others. Ask to speak with each of your key suppliers in late October/early November and explain you intend to run a promotional period and ask how they might be able to help. Success might look like a temporary adjustment from price group three to price group one; or maybe 50% off a dishwasher if the client also orders an oven, hob and extractor. Crucially, explain that on 1st February, you will submit a list of confirmed sales that will be ordered with them throughout the coming year. In this way they know the promotion really is time-limited, and really is about delivering incremental revenue. (Some companies may even help you fund advertising spend for your campaign… If you know how to ask).
How much should I discount?
This is a delicate balance- enough to entice prospects to contact you and buy, but not so much that your margin erosion negates the profit from increased revenue.
Once you have obtained supplier buy-in, you have the information you need to design your promotional pricing strategy. The idea is to create promotional offers based on pricing bands that become more attractive the further up those bands a client transcends. For example:
- £12k- £18k: 20% off fitting + 50% off a dishwasher and 10% off a selected worktop
- £18k- £25k: 25% off fitting + 75% off a dishwasher and 15% off a selected worktop
- £25k+: 30% off fitting + a free dishwasher and 20% off a selected worktop
So, what does this mean for margin? Well, it will probably be lower than you usually achieve. Let’s take the example of a dishwasher for which your normal Net Buying Price is £550. You are probably selling this, inc VAT for £950.00. If your supplier agrees to it being 50% off subject to ordering x4 other IQ700 appliances, for example, the actual cost of funding a free dishwasher to your client is just £275, but represents a saving to the client of £950! It also means you can advertise a genuine sale of ‘over 25% off’ this is number is a key hurdle to getting prospect’s attention.
There are lots of examples of deals you can do, such as free upgrades from a lower price group to a higher price group door. The manufacturer might agree to 10% off your normal buying price for a selected range; if you discount by the same amount, you can perhaps offer the client a price group 3 or 4 door for the same as price group 1. Manufacturers typically enjoy higher margins on their more expensive products, so might be more able to help on the more expensive ranges.
So yes, you are sacrificing some margin, but if you promote the sale effectively, and leverage the willingness of a client to make a decision promptly to secure a time-limited discount, you can hugely increase turnover. If your business normally takes orders for £80k a month at a 36% gross margin, your Gross Profit is normally £28,800. If you increase sales by 50% in one month to £120,000, at a 32% margin, your GP increases to £38,400. If your business normally sells £250k a month at a 36% margin, that £90k GP, can become £120k. P.S, remember these additional sales help you meet higher supplier rebate tiers too!
You now have a genuine, bonafide, time-limited sale offer that works for you and works for your clients, all you have to do is attract more prospective clients to buy during it. How do you do that? Well, as a first step, you can pick up the phone to us at Lead Wolf, and we can work with you to deploy a January sale marketing campaign based on campaign templates that have delivered more than £4m in revenue.
Oh, one last thing, your January sale starts on the 26th December. You can generate more leads in the 7 days from Boxing Day to New Year’s Day than any other week of the year… Whether you are open or closed.