By Peju Kukoyi
Quarter four of every year, particularly December during the festive season, is usually a great period for individuals and businesses. It is a feel good period for everybody. In December, theres usually that rush by consumers to buy as much stuff as they can buy: gifts for loved ones, food items for the Christmas celebrations, clothing for the family, holiday trips, Christmas decors, cars to show off in the village and make a statement, tickets for the cinema and shows, even furnishing to give the home a brand-new festive look.
For businesses, as expected, there is a stiff competition to capture this market, which is why they freely give seemingly mouthwatering discounts to entice consumers not only to buy but to buy more than they would ordinarily buy or can comfortably afford. Some businesses also initiate promos. In the quarter, businesses play the volume game with margins and profitability in mind.
Consumer eagerness
The demand for goods and services in the last three months of the year is usually intense, particularly in December. Consumers seem to be in a game to outspend the next person. This is what businesses desire, a ready and willing market. The smart ones take full advantage of this. However, despite the available market a business must take the necessary steps to ensure it attracts a big chunk of that market. No matter how good a product is, there are many other competing products equally as good or even better. So, while theres a market, a business must actively cultivate this market to ensure it gains a reasonable or above average market share.
What your business must do
Big corporates like Coca Cola, Nestle, First Bank, MTN, and others have long played this festive season game so they understand how it works and they give it their best shots each year. The approach to capturing a sizeable market share during the festive season is basically three-pronged: Advertise. Run Promo. Give Discount. As a small business owner, you need to learn this game and play it as adroitly as the big corporates do.
You may not have the liquidity the big businesses have, still, run with what you have and be very strategic about your play to ensure you achieve your objective. You have the advantage over the big corporates in that you are small and nimble and can quickly take action or change direction, if necessary. What matters to the consumer at this period is the fact that a business is considerate enough to sacrifice something for them. This is a period of gifting and consumers expect freebies from brands in exchange for their loyalty.
Advertisement
First, as a business, you must advertise your product(s). Advertisement is not even negotiable for a business that desires growth. The last quarter of the year is especially crucial to showcase your products to consumers. Online and social media is usually a good place to start, and it can be budget friendly. Your advertisement should be targeted; you know your market and you know where they are and you understand their peculiarities. Your advertisement must factor in all of this.
Advertisement is a great way to show consumers your products and demonstrate the needs those products can help address. Great advertisement helps the business capture the eyes and minds of the target audience. In the fourth quarter of the year, in December particularly, consumers are making buying decisions for the festive season. Your advertisement places the brand/product right in their faces as they take these decisions making it easy for them to pick your products.
Promos/discounts
Consumers understand that the festive period is a time they get great prices for products and services. And they look forward to the period to stock up. As a business, you dont want to disappoint your customers and prospects. Such promos and discounts help a business to reward loyal customers and build goodwill in the process. There are opportunities such as Black Friday, Cyber Monday, and Christmas that a business can piggyback on to thank customers for their loyalty, assure them that the brand cares about their financial health, and attract new prospects with bargains and later upsell to them.
Many organisations take advantage of this period to stay relevant and acquire new customers. If your brand refuses to utilise the period by toeing the discount/promo line, it may end up antagonising customers and prospects, leading to loss of business and relevance. Promos and discounts are also great tools to clear inventory and meet sales target for the year.
Other benefits of promos/discounts
It may seem contradictory that businesses are offering discounts when demand is high. After all, in basic economics law of demand and supply, we were taught that higher demand leads to higher pricing and vice versal. So, why will businesses that should be charging more during the festive season of high demand be given discounts?
Artificial demand stimulation and upselling
While demand is high during the festive season, brands use the promo and discount cards to create limited-time offers to spur urgency and increase sales volume. When consumers perceive that they can get a bargain, it often dispels their hesitancy ensuring they act faster and purchase even more of the product. Discounts also draw consumers to your store providing you with the opportunity to upsell to them.
High volume, higher profit
Its quite simple. Sheer sales volume can produce higher overall profit, lower margins notwithstanding. This is true for electronics, retail, and fast-moving consumer goods that are the most targeted products during this period. Let’s do the math. Imagine you sell a dress produced at N5,000 for N10,000 regular price. That gives N5,000 in profit. If demand for it rises due to Christmas and 10 of those dresses are bought that would have been N100,000 revenue with a profit margin of 50% or N50,000. Supposing you run a promo and give out the dress at N8,000 and 20 pieces are bought because of the bargain. Thats N160,000 in revenue with profit at N60,000 while the profit margin is 37.5%. At N8,000 per dress, the profit margin is 38% while at N10,000 the profit margin is 50%. But in terms of overall profit, the N8,000 price gave the business a higher profit than the N10,000 price because of volume of sales.
Boost conversion rate
Everybody loves a bargain; we all want quality products at an agreeable price. So, when consumers sense a bargain, they flock to the product(s). A smart business will ensure such customers have a great customer experience to win their loyalty. A bargain plus great customer experience will capture customers’ hearts and will not only convince them to buy more but also ensure they keep coming back. With brand loyalty secured, the business can upsell and or cross sell to the customer.
Plan for the discounts and promos
Many smart businesses know how important fourth quarter sales and customer acquisition are so they factor the Q4 discounts and promos into their pricing templates at the beginning of the year or the beginning of their fiscal year. Sometimes, the discounts and promos are mere illusions of bargain. A business with an eye for Black Friday, Cyber Monday, and Christmas may raise prices pre-Q4, maybe in Q3, then four months down the line during the feverish festive season buying spree, it crashes the price by offering “generous discounts” and consumers fall over themselves to take advantage of the bargain.
The benefits of promos and discounts in quarter four of the year, particularly in December, are critical to a business growth objectives to be ignored. Some of these benefits include acquisition of new customers while helping existing customers strengthen their brand loyalty. Discounts help to boost sales and achieve sales objectives.
As a business tidies the books, discounts help clear inventory thereby enabling restocking for the coming year. Discounts and promos are a great and cost-effective way to introduce a product or brand into the market. Discounts contribute to building great customer experience and goodwill for the brand. They also enable a business to compete favourably even with the industry big players
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