The holiday season is the best time of year for consumers to find deals and for businesses to increase revenue. In 2022, the U.S. surpassed its holiday sales record amidst rising inflation, with more than $900 billion in sales, according to the National Retail Federation. Merchants can increase their gains and create loyal customers this time of year with intelligent business optimizations and strategies. Through strong marketing campaigns, promotions, special events, and discounts, businesses can create a foundation for lasting relationships with their consumers.
With the competition in the online marketplace, retailers need a promotional and pricing strategy to stand out in the crowd. Starting early is the first step to effective holiday planning. Many consumers start their holiday research and shopping in October or even sooner. According to Walmart's first-party data from 2022, only 7% of the store’s customers started holiday shopping after Thanksgiving. Merchants should establish their promotional and assortment goals and make fulfillment arrangements months in advance. To align with those goals, retailers should generously budget ad dollars. Advertising creates both product and brand awareness and drives sales. It also generates excitement and encourages shoppers to engage with one particular business over another.
Sales events have a powerful influence on conversion rates. They inspire a sense of urgency among shoppers to purchase, and they feel encouraged by the concept of saving money. The best sales techniques consider different types of customers and apply a custom approach to the event, the advertising surrounding it, and the incentives offered during it. Positive sales experiences from effective seasonal pricing will lead to repeat customers. Post-holiday sales events and promotions should also factor into the seasonal pricing strategy. They attract shoppers looking for deals, which helps stores clear out remaining holiday inventory and maintain the sales momentum after the rush and into the soft months of January and February.
Developing a Seasonal Pricing Strategy
Seasonal pricing is fueled by supply and demand. In many cases, a store’s seasonal pricing model applies higher retails to goods during periods of peak demand and lower prices during off-peak times. For example, winter coats cost more during cold weather months, but their prices decrease significantly as the season ends. The months leading up to the holidays, however, are different. While the demand and traffic are high, so is competition, and retailers know they must appeal to bargain-hunting consumers. Hence, they implement a seasonal pricing strategy that allows them to capitalize on the increase in commerce while offering lower pricing.
Promotional holiday pricing can drive demand for a merchant’s products or services, especially when the deal is only available for a limited time. The sense of urgency created by the small shopping window spurs people to buy. Specific events with exceptional prices (or the illusion of them), like Black Friday and Cyber Monday, can generate vast amounts of business, but, establishing seasonal pricing isn’t as simple as it may seem. Many things factor into the equation, including company-specific data, revenue goals, and brand positioning. External considerations like market dynamics, consumer demand, and competitor pricing can also influence the big picture. In addition, seasonal pricing carries some risk. Pricing that is too high can cost merchants sales. Pricing that is too low impacts revenue. The best methods optimize both profit and revenue. Retailers create optimal holiday pricing by being attuned to their business and target audience and making the following observations.
- Identify the key customers—Past sales and customer data reveal seasonal demand for a store’s goods or services. Retailers can establish whether seasonal pricing impacts the sale of their products. A review of which items were sold to whom and when can inform the pricing for the following year.
- When the best sales opportunities occur—By tracking previous sales spikes, businesses can target their promotional and marketing efforts to these critical periods and establish ideal pricing.
- What the base, maximum, and seasonal rates should be—A company’s base rate should produce a profit and cover costs during usual demand. A thorough analysis of business expenses provides insight to retailers about what they must charge to break even. By evaluating the competition, merchants learn what other companies charge for similar products and how much the consumer might pay.
Seasonal rates for businesses can be higher or lower than the base rate and can be used during high or low demand. Depending on the business model and goals, they can leverage tiered pricing, package deals, and limited-time offers, or retailers may choose to increase prices at certain times. Customer behavior is still the top influencer for setting appropriate seasonal rates.
After implementing a seasonal pricing strategy, businesses should evaluate its sales impact, market share, customer response, and revenue and adjust as needed. Staying competitive is imperative, so careful attention to market trends will help retailers make intelligent pricing decisions.
‘Tis the season to make money. For many online businesses, holiday sales are critical to the overall performance for the year. Opportunities abound during this time of increased traffic and unbridled consumer spending to make a lasting impression and maximize revenue. A robust holiday pricing strategy employs advertising, marketing, promotions, sales events, and pricing tailored for the season.
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