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  • The ABCs of Discounting, Part 2

    The goal to offering discounts is to increase your shop's sales. Before offering a discount, weigh the following considerations.

    Make "good deals" as easy on yourself as possible.

    Start with payment terms. You could require payment on discounted sales in advance, or at least under strict conditions. Otherwise the discount will not apply.

    Corporate customers will understand and appreciate your focus on the bottom line. Most won't miss a payment deadline if they will lose their discount.

    Never give discounts on outgoing wire orders. There just is not enough money in your commission to give much away.

    On the other hand, you could offer a discount on your service charge for placing a wire order early. The discount would enable you to shift work to the (slower) time before the holiday strikes with full force.

    Know Your Costs

    The key to discounting is knowing your costs. What are the variable costs associated with making an additional arrangement?

    You would have the expense of the flowers, container, supplies and the labor to put it together. For most retail florists, those variable costs run between 40 and 50 percent of the retail price of the arrangement.

    Your rent or utilities would not increase because you made one more arrangement. In fact, most of your monthly expenses would remain unchanged.

    If it was a slow period, you might not have to pay for any extra labor to make the arrangement either. That would lower your variable costs even more.

    Once you know what your variable costs are to make an additional arrangement, you can set a discounted price. The difference between the discounted price and your variable costs is the incremental contribution to your bottom line.

    Planning Your Program

    A well-thought-out program will help you achieve your desired results.

    Consider whom you are targeting and who will take advantage of your offer. If they are not the same people, you need to rethink the way the program is organized. Make sure the incentive goes to the right people and that the requirements are strict enough to keep others away.

    All discounting programs must have clearly defined starting and stopping dates. Don't ever get caught with an open-ended coupon that has no expiration date.

    Of course, if a good customer comes in with the coupon after the expiration date, you should probably honor the discount anyway. That's a small price to keep a solid relationship.

    Good dating merely keeps the masses from taking advantage of your generosity.

    Different Discounts, Different Occasions

    Different circumstances call for different solutions.

    For example, you might give a volume discount for Professional Administrators WeekSM. One to four items — regular price. Five to nine items — 15 percent off. Ten or more — 20 percent off. In addition, customers get only one delivery charge no matter how many deliveries are made to one location.

    A better discount program for Mother's Day would be one that encourages add-on sales. No one gives more than one arrangement to their mother on the second Sunday in May. You might give a discount for candy or a card to go with an arrangement.

    Discounting can be an effective tool.

    However, always remember that discounting is the least creative way to compete. If you can think of a way to increase sales without cutting prices, by all means, go for it.


     

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