Crisis Maneuver: Discounts That Save Businesses

In addition to standard discounts and promotions that businesses use in everyday operations for marketing purposes, there are also crisis discounts that help businesses stay afloat during challenging times.

Crisis discounts are a marketing tool aimed at stimulating customer activity during economic downturns or temporary business difficulties. These discounts are provided to attract customers, increase sales, and maintain financial stability during a crisis.

The main goals of crisis discounts are to increase sales volume, retain market share, maintain customer loyalty, clear out inventory, and preserve cash flow.

Offering discounts helps retain existing customers and attract new ones in conditions of reduced purchasing power. During a crisis, businesses compete for limited demand, and discounts help them remain competitive. Discounts show that a company cares about its customers, which strengthens trust and builds long-term relationships. Discounts can also be used to accelerate the sale of items with low demand. In a crisis, maintaining cash flow—even at lower margins—is crucial.

Crisis discounts help attract new customers. In a crisis, customers actively look for favorable deals, which can lead them to your brand. They also enhance customer loyalty. Offering discounts demonstrates a company’s ability to adapt to challenging market conditions and care for its customers. Such discounts can improve reputation. Promotions and discounts create a positive image of a company that is willing to support its clients during difficult times. Crisis discounts stimulate repeat purchases. Temporary discounts encourage customers to buy products here and now. This helps quickly free up inventory, which in turn reduces storage costs and prevents product devaluation.

However, it’s important to consider that crisis discounts reduce profits. Frequent discounts can significantly lower margins, especially if the discounts are too large. They often attract customers solely because of the low price. Such customers do not become regular ones and return only for the next discount. Additionally, customers may become accustomed to discounts. If crisis discounts become a regular practice, customers may start perceiving them as the norm and stop buying products at regular prices. There is also a risk of damaging the company’s image. Frequent discounts may create the impression among customers that the product quality is low. Demand for products may also become uneven. Promotions can cause a peak in sales during discount periods, leaving gaps in customer activity between promotions.

Crisis discounts are appropriate when there is an economic downturn, and the purchasing power of the population decreases. They are also suitable during a drop in demand in specific product categories (e.g., seasonal goods), during an internal business crisis to quickly increase cash flow, or in the face of heightened competition to retain customers from switching to competitors.

Crisis discounts are an effective tool when used strategically. They help businesses stay afloat during challenging times, but it is important to monitor the volume and frequency of discounts to avoid long-term losses and reputation damage.

Crisis discounts can be divided into two main categories: clearance sales and discounts on defective goods.

Clearance Sales

A clearance sale is an event aimed at selling items that remain in stock and have not been sold within a specified timeframe or that are in low demand. This is often done to free up space for new products, reduce storage costs, or generate additional revenue from outdated inventory.

Advantages of Clearance Sales:

Warehouse space optimization: Removing items that occupy storage space helps streamline logistics and prepare the warehouse for new inventory.
Customer attraction: Low prices during clearance sales can draw in more customers, increasing traffic and brand loyalty.
Loss reduction: Even if items are sold at minimal profit, it is better than writing them off as a loss.
Quick cash flow: Selling off stock helps generate funds that can be reinvested in more in-demand products or marketing.
Marketing impact: Sales create a sense of urgency for buyers, encouraging them to make quicker purchasing decisions.

Disadvantages of Clearance Sales:

Risk of brand perception decline: Frequent sales might give customers the impression that the company sells low-quality items or is facing financial difficulties.
Low margins: Clearance items are often sold below cost, reducing overall profitability.
Discount management challenges: Incorrect pricing strategies can lead to confusion or dissatisfaction among customers.
Attraction of “bargain hunters”: Clearance sales may bring in customers interested only in low prices, who are unlikely to become loyal customers.
Logistical costs: Organizing clearance events may require additional expenses for advertising, packaging, or item reorganization.

Clearance sales are a valuable tool when used strategically, such as for optimizing inventory and attracting new customers. However, Beautier advises considering the long-term risks to brand reputation and carefully planning such promotions to minimize losses.

Discounts on Defective Goods

Discounts on defective goods are a method of selling products with minor imperfections that remain functional. These items are sold at reduced prices, making them attractive to customers willing to trade perfection for a better deal.

Advantages of Discounts on Defective Goods:

Loss reduction: Instead of writing off defective goods, the company gains revenue, albeit smaller.
Attracting customers: Such items can appeal to budget-conscious customers or those willing to overlook defects for savings.
Inventory reduction: Defective goods free up storage space for new products.
Environmental responsibility: Selling defective goods instead of disposing of them helps reduce waste, positively impacting the company’s image.
Increased loyalty: Transparent policies where customers are informed about defects and offered fair discounts build trust in the company.
Additional customer flow: Some buyers may come for discounted items and end up purchasing other products.

Disadvantages of Discounts on Defective Goods:

Reputation risks: Selling defective goods may lead some customers to believe the company produces low-quality products.
Risk of returns: Despite being informed of defects, some customers may remain dissatisfied and request returns, increasing administrative costs.
Limited market: Not all customers are willing to buy items with imperfections, even at significant discounts.
Complexity in defect assessment: Proper documentation and evaluation of defects are necessary to avoid complaints or disputes.
Additional management costs: Discounted goods may require separate accounting, labeling, and marketing efforts.
Perceived value reduction: Frequent sales of defective products may lower the overall perceived value of the brand.

Recommendations for Selling Defective Goods:

Transparency: Clearly specify all defects to avoid misunderstandings and complaints.
Clear sales terms: Inform customers about the non-returnable or non-exchangeable nature of these products if applicable.
Segmentation: Place defective items in a separate section to avoid mixing them with the main product line.
Fair discounts: Ensure the discount is proportional to the defect level, so customers perceive the purchase as worthwhile.
Packaging and labeling: Clearly mark defective goods to prevent confusion in storage or at the point of sale.

Discounts on defective goods are an effective way to minimize losses and attract a new audience. However, Beautier emphasizes the importance of maintaining transparent and honest policies to preserve customer trust and protect the brand’s reputation.

These types of crisis discounts should only be used in urgent situations, force majeure circumstances, or when absolutely necessary.

Good luck! May your business thrive, and may you never need to rely on such discounts!