In an unpredictable economic climate, savvy retailers are constantly challenged to innovate and adapt, finding fresh strategies to remain resilient as consumer confidence retreats. Deep discounts are among the easiest and fastest ways to pull customers into stores, but slashing prices in tough times is a lot like drinking ocean water to quench one’s thirst—your stomach or cash register may feel full, but you’ve only succeeded in making your long-term problem dire.

For healthier alternatives to discounting in broad strokes, we looked to mainstream consumer packaged goods retailers, cannabis industry brands, and retail data specialists. For most brands, targeted discounting will always have its place in the marketing mix, but it should never lead the charge. When applied correctly, the following six margin-friendly strategies can keep inventory turning while working to establish brand loyalty without sacrificing profitability.

Build an assortment of products to encourage larger purchases

The cannabis industry loves its “buy one, get one” BOGO deals. These types of sales feel like major steals for consumers while encouraging them to spend more money than they planned. BOGO promotions also thrive in the fashion retail space—like at PacSun, where you can seemingly always snag a second or third pair of jeans for a fraction of the price.

“At PacSun, we like to offer something like $2-for-$20 t-shirts or two-for-$49 denim,” said PacSun Email Marketing Specialist Amy Gonzales. “Wholesale pricing also helps by moving large quantities of slow-moving inventory. Some brands like to use this approach to introduce their proprietary designs to a whole new group of shoppers.”

The road to a successful, margin-friendly BOGO sale in 2024 starts with effective market basket or affinity analysis using objective data to identify how customers purchase products together. Without proper data mining, it’s just another price-cutting guessing game.

“Checking attribute cross-purchasing can also be useful,” said BDSA analyst Brendan Mitchel-Chesebro. “For example, does it make sense to have multiple ‘sleepy’ gummies on your shelves? If Brand A and Brand B both have the same strain of flower, do they both need to be featured? Are disposables cannibalizing cartridge sales? Should they be placed on a separate shelf? These are all things to think about when structuring your sales floor.”

Once you have a clear understanding of your customers’ ideal product pairings, it’s easy to find BOGO combinations that drive revenue without ignoring profitability.

Examine the power of premiums

It’s important to understand the power of premium products at retail. These items frequently surpass value products in total sales revenue—not because they sell more units, but because their higher price points yield greater returns with fewer sales.

“Our industry is slowly learning that just because you are selling more units doesn’t mean you’re bringing in more revenue,” said 22Red Arizona Sales and Territory Manager Gustavo Briseno.

“The real challenge is educating consumers on why products are more expensive. Higher-quality products demand more research and development, quality control, and commitment to providing the best products on the market.”

In the case of 22Red, education succeeds when it speaks to the company’s three key groups: the cannasseurs, the cannacurious, and the creatives. The marketing magic comes from nailing down the right consumer groups and then finding common ground between their seemingly disparate needs. According to Leaflink, 22Red is Arizona’s top-selling brand for non-infused pre-roll. Headset’s data snapshot on Arizona pre-rolls in February shows 22Red with five of the state’s top 10 joints by sales. 

Encourage and incentivize with value-add programs

Brands can add value to their existing price tags with carefully targeted value-add programs including holiday deals, free shipping, rewards programs, special discounts, or aforementioned bundles.

“At PacSun, we offer bonus rewards when signing up as a PacSun rewards member, welcome sign-up discount codes when signing up for emails/SMS, refer a friend, and student discounts,” Gonzales said. 

Each of these initiatives works to establish loyalty while cultivating positive shopping experiences, hopefully creating a long-term customer with high lifetime value. Before looking into any type of value-add program, brands and retailers must ensure their remarketing or retargeting campaigns are thoroughly dialed in. Otherwise, the cost of customer acquisition will likely be too steep and the result could be the same as slashing prices.

Offer exclusive products or limited editions

This is especially important when planning for cannabis-specific holidays like 4/20, 7/10, and Green Wednesday, when big deals are the national industry’s norm. According to FlowHub data, April 20, 2023 was the busiest sales day on record with discounts included in 69 percent of all transactions. With 4/20 falling on a weekend in 2024, foot traffic and sales records are expected to reach new heights.

“Consumers will likely expect discounts and special promotions for these holidays,” Chesebro said. “Not having a strategy that includes discounts for the biggest cannabis holidays can leave retailers at a competitive disadvantage, especially in regions with lots of retail availability.”

Creating a sense of urgency with limited edition releases and special holiday collaborations can be an effective strategy when a retailer is expecting to double its foot traffic on one of the industry’s major sales holidays. Successful collaborations like Cookies X Stündenglass and VIBES x Keith Haring combine exclusivity and urgency when released in limited quantities, and price tags are quite frankly the last thing checked when a hot and highly sought-after product is up for grabs.

Personalize their shopping experience

In 2024, the more personalization in a shopping experience, the better. According to McKinsey & Company, behavioral segmentation is the foundation for creating personalized shopping experiences that lead to a 15-percent increase in long-term value and retention. 

To segment and market effectively, brands and retailers must invest in a complete retail-focused tech stack that prioritizes personalized recommendations based on customer preferences and purchase history. Spending the time it takes to identify, integrate, and implement the right industry-focused point-of-sale system, ecommerce solution, data and analytics tools, loyalty program, and customer relationship management platform is a necessary part of running a competitive business in today’s technology-focused shopping environment. With the right tech stack in place, retailers and brands have access to reliable, real-time data on exactly what’s driving the best sales.

Invest in content marketing

Before reducing a product’s prices, make sure you’re raving about it in ways that resonate.

“I would say it’s necessary to lower prices when you are so far past the competition in your tier it’s forced,” Briseno said. “I would also argue that it’s never necessary to reduce prices as long as the quality of the product matches the asking price.”

While a company often believes in its own product’s supreme value, the marketplace may not. Understanding this disconnect requires spending serious time with focus groups, participating in difficult discussions with budtenders, and incentivizing customers to share their feelings through in-depth surveys. With a clear understanding of the perception gap, marketing teams will have a much easier time crafting engaging content for landing pages, emails, blogs, press releases, and social posts.

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• Source: https://mgmagazine.com/business/marketing-promo/6-strategies-to-consider-before-slashing-prices/