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African Entrepreneur with Feyi Olunuga: Jumping On the Bandwagon For Black Friday Discounts?

Feyi Olunuga

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Feyi OlunugaWe know Christmas is approaching when we start seeing the Black Friday adverts going up on the streets of Lagos. It started off being a one-day sales event that has evolved to as many as 14 days of offers for discounted products and services. As a small business in any industry, discounts on products is something we have all considered. Should you join the bandwagon for Black Friday and offer your products and services at rock bottom prices? The short answer is – No.

I walked into a store recently to buy some fabric, as I made my selection, an attendant was with me telling me the price and cutting the length I required for each selection. I selected 60 yards in total of different fabrics and was very happy with my selection; while she was at the till folding and packing my fabrics, I decided to do some research. I asked her if I could have a discount since I was buying up to 60 yards of fabric. She smiled and immediately offered me what came to a 20% discount off the price she had originally offered. As a customer, I was happy to be saving some money – but as a business consultant that works with businesses on their pricing strategy, I wondered if she realised how much of her profit margin she had parted with in a speedily considered discount.

Businesses all over the world offer discounts; many justifications have been given for offering discounts. Some of them are: It leads to a boost in sales; volume discounts make the customer buy more; it attracts new customers, and so on. This strategy as a short term and occasional tactic can work to boost sales; a majority of customers are attracted by discounts. There are some downsides to offering discounts: If you keep doing it, some customers will expect the discounts and will not buy your product without it. There are some of us that wait for Black Friday every year to make certain purchases. This works for retailers that are trying to get rid of old stock ahead of the New Year. As a small, you must consider: Is this the best strategy to achieve your sales objectives? Are there other approaches that will work better? Discounts should be considered as part of your pricing strategy; it should not be a hasty decision made at the point of sale. In my example above, I had already committed to the purchase she didn’t have to offer me a 20% discount – I will have made the purchase with or without the discount.

Some will argue that the discount on my fabrics was a good strategy because it made me happy and will ensure I come back in future – I beg to differ. There are other value-adding rewards that can be offered to customer. It varies from business to business but here are some examples. Using my experience above, if she had offered me a ‘gift’ that was worth 5% of what I spent on that transaction, I will have been just as delighted – ‘free’ beats discount any day! Can you think of something your customers will love; it can be free samples of your product or a complimentary accessory; for example a jewellery seller can offer jewellery boxes to customers that spend a certain amount on purchases. I have seen many businesses getting this wrong by offering pens, notepads, mugs etc. that do not attract the customer. The trick is to ensure the gift is useful and an attraction for your target customers. Other rewards that work are: Free next day delivery, Free gift wrapping – you can even throw in a free Christmas card.

Offering price discount can sometimes erode the value of your brand in the eyes of your customers. Yes, we appreciate the money it saves us, but we can’t help but think – if she could take off 20% so easily, could her products be overpriced? You should discount with a reason: ‘Summer Sale – Old stock must go’ and it should be part of your marketing communication. A new season sale that offers discounts on lines from the previous season works because the customer understands that there is a reason for the price slash. This should not be confused with a ‘Christmas Sale’ for example where prices are slashed simply because it’s Christmas – or that’s how it is communicated. You should consider offering Christmas packages instead; for example if you have 5 items in a Christmas package that usually retail for N5000 each, you can choose to offer them in a package for N20,000 as opposed to offering a 20% discount on each individual item. Once it is in a package, it is a different product.

Discounts can work when they are thought through and part of a strategy that includes an implementation that doesn’t harm your brand or your bottom line. There are some instances where outright discounts absolutely work; one is to lock in future sales; for example you usually get a discount when you choose an annual subscription instead of a monthly subscription at the gym or from your cable TV provider. The benefit to the business is apparent; the consumer is locked in for a fixed period – that is guaranteed income. Another is a discount to encourage a certain payment method; some businesses offer discounts when you pay in cash because it saves the cost of the charges they will pay on a card transaction. As you decide what promotion to offer, ensure it is thought through, beneficial to your customer and also good for your business.

Happy Thanksgiving and Happy Black Friday Shopping ☺

Feyi Olunuga is a start-up enthusiast. She is the Managing Partner at Lunuga Limited; a business consulting firm that provides services to companies in the Food & Beverage industry. She's also the CEO of Lunuga Foods Limited, a distributor of made in Africa food & beverage products to supermarkets across Nigeria. Following her passion to aid the development of businesses and entrepreneurs; Feyi founded The African Entrepreneur – a platform with a vision to share experiences that inspire action through a new crop of African entrepreneurs that have harnessed the lessons learnt from other entrepreneurs across the continent.Follow on Instagram @AfricanEntrepreneurContact: [email protected]

6 Comments

  1. Dentale

    November 25, 2016 at 4:48 pm

    Many thanks for this Feyi. I’ve been seriously considering offering discounts for Black Friday but I’m already selling with a medium to low markup. Desperate or unplanned discounts being able to erode your brand value is so true! I have lost a sale by offering a 15% discount. The customer ordered a number of items. Just as I was about to deliver, I noticed a quality control issue with one of the items and called her to apologise that it was now out of stock. She was upset, but not livid. In my bid to pacify her, I offered a 15% discount. I sensed an Immediate change in countenance. She responded by saying I should not ship the remaining items yet and she would call me back. That was it o! She didn’t call. After several unanswered calls to her, she finally responded via SMS to say she was no longer ready go make purchase. Now I only offer discounts to clear old stock. Lesson well learned.

  2. ese

    November 25, 2016 at 4:53 pm

    Wow…helpful?

  3. o

    November 26, 2016 at 12:45 pm

    Thanks for this. Very useful

  4. anon

    November 26, 2016 at 2:24 pm

    Ms. writer I think you are generalizing concepts across various parts of the world…your fabric purchase was in Nigeria where we all know merchants have 200% markup on products for no apparent reason. Let me assure you that the seller was able to offer the 20% discount on the spot because she is making at least 150% on that. I never buy anything in Nigeria without asking for a discount and I always get it.

    The shops in Nigeria know that we too bargain so they incorporate it into their prices. In the western world this is different and merchants cannot just add markups for no apparent reason…Nigeria is a different ball game madam so take note…

  5. Omoté

    November 26, 2016 at 2:37 pm

    Thanks for this piece! I always under price my services n still give discounts. Recently I got a rude awakening, someone was bargaining #3500 for my services( which I would have accepted) but I didn’t have the time to fit her in. So I sent her to a friend, she paid #5500 on the spot without argument. I was in shock.

  6. Jola

    November 26, 2016 at 8:59 pm

    Great piece Feyi. Love the idea of offering less expensive complementary products. I agree with Anon on the “Nigerian business culture” though. Sellers actually expect you to price. It’s a cultural thing which I think spurs from not having proper organised retail for the longest time…People generally bring “open market tactics” to business. The rise of organised retail online and offline is helping for sure.

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