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      Home LAUNCH Franchising Franchisee Advice

      6 Questions Before You Discount

      Richard Mukheibir by Richard Mukheibir
      Apr 23, 2018
      in Franchisee Advice
      18
      discounting
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      For some retailers, discounting is a way of life. Most, though, begrudge the thought of discounting – and I completely identify with that.

      It was not until last year that we ran our first company-wide discounting, our “Spring Clean” campaign. It took Trevor Locker, our Chief Operating Officer, to convince me that there are times when discounting makes great business sense – just as there are times when it could spell business disaster.

      Here is the checklist of questions which we hammered out as a guideline to successful discounting that will let you sleep peacefully at night:

      1. Is this a stock clearance?

      Some businesses stock ranges that have a very short shelf life, such as clothing that quickly goes out of fashion. If this is your market, you need to learn to accept that some of the goods you have bought in will be less appealing than others to your customers. The sooner you shift them out of the store through sale discounts, the sooner you can replace them with goods that repay you with a full profit.

      2. Is this a cashflow crunch?

      If you are reluctant about devising quick discounts on selected ranges to generate enough cash to pay the rent, you are right. This is a red flag that your business could be in trouble. Pay attention and spend time focusing on how you will recover once you are past this immediate crisis – otherwise you are in a downward spiral.

      3. What are you celebrating?

      Maybe you have a business or seasonal anniversary that you want to celebrate. Selected discounting in this situation can help you reward repeat customers and consolidate their loyalty as well as attracting new customers into your business.

      4. Is your promotion a win-win?

      Long-term repeat discount promotions can have a negative impact on even your most loyal customers. Effectively you are training them to wait for your discounts – unless you set up a win-win strategy such as partial discounting. A great example of how this can work is Steers’ Wacky Wednesday. Customers win when they come into the branches for a discounted hamburger. Steers wins because customers still pay the normal price for cool drinks, chips and so on, sales that the company probably would not otherwise make on a quiet midweek trading day.

      5. Are you joining the herd?

      black-fridayBlack Friday is a classic example of this. Some retailers have felt stampeded into offering discounts because they worry that everybody else is. The jury is still out on whether this new trading phenomenon increases sales overall or just moves them out of December and into November. To benefit most, you need to have stock that you want to clear or loss leaders that you have bought in at prices that do not cripple you financially.

      6. Do you own your own sale?

      Our company-wide “Spring Clean” concept sale was a great example of finding a reason to discount that worked for our branches, our customers and our brand and meant that our discount was not drowned out in the marketplace.

      We encouraged customers to bring us unwanted goods from their homes and benefit from freeing up the cash value.

      At the same time, we also attracted customers into the stores to pick up bargains from stock that we wanted to clear. Running this promotion at a time of year when many other retailers are quiet promotionally meant that we owned the spring-clean discount concept and it highlighted our brand across the market.

      Richard Mukheibir

      Richard Mukheibir

      Trading and entrepreneurial instincts are key elements of the business DNA of Cash Converters Southern Africa co-founder and managing director Richard Mukheibir. He traces his family’s lineage in small business development back more than a century to his grandfather who founded Mukheibir Brothers in Barkly East in 1897. Mukheibir co-founded Cash Converters Southern Africa with Peter Forshaw in 1994 and has now been involved with franchising for nearly a quarter of a century, thriving on its energy and the people-driven environment.

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