If you plan to make an offer, make sure that you understand all the costs associated with its acceptance. At the same time, if you label your products as offers, you will end up with a lower profit for the exact same costs. So how is this idea worth your cost optimization plans? Perhaps you should think about it before totally ignoring it.
What are you trying to obtain with an offer?
If you take offers for some company costs with low profits, you will manage to understand why they must be planned, administered and controlled. Every pound, dollar or euro that you take from the selling price is a pound, dollar or euro that you add to the profit.
It seems to be a lot easier to choose the easy way to boost your sales by lowering the costs. The marginal costs represent a deadly weapon in the salespeople’s hands, especially if they have no scruples and only care about the actual commission. All your contracts become marginal before you even realize it. In conclusion, you have to try out the purpose of each offer in particular, not to mention about doubting all the potential ramifications.
- Are you trying to get rid of all the unwanted inventory? Have you considered the impact over your other production lines?
- Are you interested in getting new customers? If your offer will only target new customers, what happens with the old ones?
- Are you trying to complete the extra capacity? Will your customers expect these offers to continue?
The so called managers may play a very important role in the strategy of your company, especially if you are convinced that the extra contracts they bring will compensate the expenses associated with the “lost” income. This is not going to happen all the time though.
An offer that may not be too interesting
For around a year, I used to have lunch in the same restaurant, almost day by day. There were times when it was quite empty though. Therefore, the manager has decided to reduce the costs for a meal that comprised of three dishes. Clients were asked to sit to particular tables. The menu did not provide too many options. In fact, they had one or two options only. Judging by the reputation of that restaurant, clients were not too impressed with this idea. While the costs were pretty good, the clients never wanted to go back anyway.
I have travelled around more European countries. You might find it surprising, but such things are still quite popular. If done correctly, they can attract a lot of customers. If done badly, they will kill a business.
The best sign of a deficient administration
Low quality stores often come up with limited promotions over specific periods of time. The prices are automatically introduced into the cashiers’ machines. However, a deficient administration can turn such an offer into a penalty magnet. I have run into a lot of so called offers that were no longer offers. While the offers were gone, the management forgot about the banners or placards around the store. I have seen customers who paid more than what was written at the shelf. Obviously, the impact of such a failed idea will not boost your profit. Instead, it will sky rocket both the sales and your losses. It sounds hard to understand.
With these ideas in mind, never put your company in the position of an unlimited risk. You might come up with specific dates for your offers, but make sure that they are respected.
Maintaining your offers under control
There are a few different ideas that can help you keep your offers under control.
- Make sure that your system can justify, monitor and control the offers.
- Such offers should not be accepted by the sales director only, but also by the people responsible for the inventory, bills or supplies.
- Come up with efficient procedures for closing offers, whether it comes to promotional materials, the actual organization, billing needs and other elements.
- Keep the price setting activities under control.