The main drawback of discounts is the lost money of seller. In fact, the seller reduces the price of the goods in hoping to get a part of the profits but, as a result, it reduces his profits. It leads to the following drawback like a cumulative effect. What will the competitor in this case do to keep his part of the market? He will offer similar or even bigger discounts. The result will clear. The price of the goods will decrease and will balance at the level of profitability. The seller will lose interest in the product, and possibly the buyer will lose too. After all, the buyer is getting used to obtainment of the discounts, getting used to size of the discounts and can refuse to buy any products, if he does not receive a discount, that satisfies his wishes.
The seller often offers a discount for increasing the check even if the competition is absence. At the same time, a seller can again face a problem with the loss of money. In addition, the buyer has his own opinion about the amount of the discount. If a discount size is small (1,2,3%), the buyer believes that the seller is greedy. In that case buyer does not view this discount as a strong stimulus for buying something. If the discount size is large (20,30,50%), the buyer believes that the goods have initially overvalued and may lose interest in the store or postpone a purchase at the normal price as well as he can wait for super sales. In any case, the size of the discount is limited by a markup over the cost of the goods. We consciously do not consider sales that below the product cost price.
Bonuses are a seller promise to give a discount to the buyer in the future. Bonuses have serious advantages in relation to discounts. The first advantage is that the price of the goods does not decrease and the seller receives the money in full volume. The second advantage is that in order to receive the promised discount, the buyer must to buy more goods from the same seller. The third advantage is that some buyers will not buy the second purchase and will not demand to fulfill the promise at a discount. In this case, the seller will keep all the money from the first transaction. It would seem all right. However, the seller can offer the size of bonuses, as well as the amount of discounts, only within the goods trade margin.
The main question of the article is "How can we go beyond the markup level and, at the same time, stay within the one?" How can we create a WOW(super) effect for the buyer from the size of the impetus to purchasing and at the same time to stay with a profit? The
answer is simple. Use a gifts.
With the help of a gift, we can go beyond the goods markup level. Choosing the gifts correctly, we can, if we want, create a gift that will be correspond to client's expectations. That gift will be comparable to the previous price of purchase in the eyes of the buyer. How is it possible? How can we cheat a math? After all, seller also needs to pay for the gift. The solution concludes in the interaction of several sellers of different goods and services. Let's try to understand the examples.
Example one. How much does a ticket (cinema/theater/concert hall) cost? You can get the answer in the box office. Let it will cost 100 UAH. Now, imagine that the audience is half full. How much does a ticket cost? The price is the same 100 UAH. What do you think about for what price a cinema might sell a ticket without financial losses? Any price will be right, if it`s higher than the cost of the paper on which the ticket is printed.
Another example. A service for renting bicycles, electric scooters, children's playroom and slot machines. You can see the ticket price at the ticket office. But in practice these attractions are rarely crowded. What do you think about for what price an attractions might sell a ticket without financial losses and might make a profit? Any price will be right, if the price is higher than the cost of electricity that will be spent on this attraction.
Now let's imagine a seller has bought the right to take an empty chair in the cinema for 10 UAH. And the seller gave this ticket his buyer, who had before bought the goods for 200 UAH. From the point of view of the seller: the discount is made for 5% of the check. From the point of buyer`s view: he has received a gift which value is 50% of the check.
These examples show that a seller can create conditions in which the value of a gift for client will be comparable to the price of purchase. For the seller, the cost for purchasing a gift will be a small part of the amount that he is ready to give in to a client as a discount. Only an agreement between different sellers is needed to create such connections. The fastest way to achieve these arrangements is a creating of closed trading platforms. For example, water parks, shopping and entertainment centers, etc.
Let's see how it works. We took a water park as an example. Imagine a water park in which the following businesses operate: a restaurant, scooter rental, photographers service, slot machines for children, a massage room, henna tattoos service. In addition, the water park holds parties, disco, concerts, etc. What connection can we create? For example: a restaurant can gift a free photo to client, who has a check for a sum bigger than 150 hryvna. Photographers can gift a ticket for an evening show, if the client has bought a certain number of photos. While the artist makes a henna tattoo to the child, the parent can be given a scooter ticket as a gift. Or while parents are riding a scooter, a child can play on the slot machine as a gift. This is only small part of all options that can be implemented. Where could the massage room participate I suggest to think up independently.
Why is it beneficial for all participants, including buyers? Let's consider all advantages of each participant.
The seller bought a gift for a client for a small price, but despite of price he gets a valuable gift for his client. This gift stimulates a client to buy an additional product / service.
The seller bought a gift for a client for a small price, but despite of price he gets a valuable gift for his client. This gift stimulates a client to buy an additional product / service. The seller, who fulfills the promise of another seller and provides the service / goods directly, sells the product to
additional customers, which were attracted by another seller. However, he does not reduce prices for his main sales. There is another advantage. The client has came for a gift. The key word is "came." There are good chances selling an additional product. For example, a gift to one client, but he/she can come with his/her family. Others also want a gift.
On the one hand, the seller can give gifts, and with the other hand he "trades" the gifts of other sellers.
Most buyers want to try new products/services. It often happens that the customer is not familiar with the service or the goods and he hesitates to buy. The client is afraid to spend money for a product that might not like him/her. In our case, he/she receives a gift, tries and decides to buy more. Remember he paradoxical progress in selling expensive cheeses. Sellers are not invited to buy. They invite to taste cheeses for free.
The buyer receives more goods and services for less money. For the client, it is more profitable than getting a discount in the form of money. As a result, "gift system" allows the client receives more savings and more goods and services.
A water park will also win, because of the total turnover of all inside businesses will increase. Some of these businesses can directly belong to a water park. The other part belongs to tenants. If tenants earn more, attractiveness and the cost of rent will increase. We see a classic example of a game with the addition of a sum from the game theory. There is another great advantage for a water park. But about that you could read in the next article.
Among our customers there are several large water parks which located in two regions. At the beginning of the season there are not many tourists and the weather is not always perfect. Accordingly, the water park is partially idle. Combating this period with help of simple price reduction is not the best way. Because of by lowering the price, we will lose part of the profits from those visitors who were ready to buy a ticket at full price. Also, leaving the standard price, we do not pick up those customers who could come if they have had the discount.