Introduction
Every business, big or small, knows the value of the word sale and the effect it can have on revenue generation. Sales, like clearance sales have two-pronged benefits: they attract more customers and help get rid of the dead stock.
Every retail owner knows that unsold items in the inventory are just frozen cash, hampering growth. Clearance sales are a great way to liquidate excess inventory and add a boost of life to the revenue and customer relationships. What most retailers, eCommerce businesses, or service providers get wrong is that they think the clearance sale means just slashing the prices; the traditional 50% off signboards are not attracting too many customers nowadays.
Even with the sales, the modern customer expects to feel special. Clearance sales need to be planned well in advance to create urgency, attract the bargain hunters, have them spread the word, and enhance brand loyalty. Here we share an insight on how clearance sales drive immediate revenue and build customer loyalty.
How Clearance Sales Drive Immediate Revenue
(1). It Moves Excess Inventory
Outdated or excess stock can be difficult to manage and leaves little space for new items. Seasonal changes, new versions, overproduction, and shifting market trends often lead to a stagnant inventory. Clearance sales move the inventory and turn it into cash, freeing up the holding costs in the warehouse, stock movement, and delivery. An example is the seasonal clearance sales in clothing stores.
(2). Creates Urgency with Limited-Time Offers
Sales are time-sensitive. With careful planning and spreading the word, businesses create a sense of urgency or FOMO. Customers rush to buy the products, sometimes the ones they don’t need to, thus increasing sales velocity and filling up the cash register. For example, a phone brand might launch a “48-hour clearance sale” before the launch of the new phone to entice customers with the best deals and force immediate conversions.
(3). Attracting Price-Sensitive Customers
Majority of customers look for good price deals on everything from clothes to electronics. People who prefer affordability prefer shopping in clearance sales. This makes these events a a good chance to drive in higher traffic and revenue to your store and websites. For example, lowered prices in a home appliance store attract more paying customers who would not have otherwise made the purchase.
(4). Generating Cash Flow
Clearance sales bring in quick cash, which the businesses can use to get more new stock, manage operating costs, or invest in expansion and brand visibility. For example, a small store can use a clearance sale to gather funds for a new product introduction.
(5). Boosts Cross-Selling and Upselling Opportunities
The customers who get a good deal on the clearance sales are more likely to be open to complimentary products, loyalty programs, and premium offerings. For example, a skincare brand running a clearance sale might offer bundled discounts on bestseller combos, thus increasing the cash inflow.
(6). Encourages Larger Purchases
Clearance sales that offer discounts over a specified spend threshold, motivates customers to add items to the cart to get more discounts. For example, a grocery store offers ₹100/- off on purchases that cost ₹2000.
(7). Attracts New Customers
Clearance sales are a great way for new customer acquisition without spending extra on acquisition costs. Adding a bonus for the new customers also adds a special incentive. For example, an online doll store can give extra discounts to first time shoppers.
(8). Boosts Brand Visibility
Seasonal incentives like the ‘end of season clearance sale’ aim to engage with the customers regularly. This means that even during the peak times, the brands will be the preferred choice, and customers are more likely to return each year.
How Clearance Sales Build Customer Loyalty
Research has shown that only a 5% improvement in customer retention rates can boost profits across industries by 25% to 100%. A happy customer is a returning customer and is more likely to spend more money. Loyal customers bring in a ton of benefits, such as free word-of-mouth publicity, positive reviews and feedbacks, more cash revenue, and so much more.
Here is a list of ways that clearance sales build long-term customer loyalty:
(1). Creates a Positive Shopping Experience
A well planned and executed clearance sale leaves a positive impression on the customer and when they are happy with their purchase, they are more likely to return.
(2). Strengthens Trust in Brand
Genuine discounts without any hidden or complicated terms and conditions build the consumer’s trust in the brand. This trust translates into loyalty and repeat purchases even when the sale is over.
(3). Customer Retention Through Exclusive Offers
Offering early access to clearance sales to members who have subscribed to the memberships or loyalty programs is a simple way to boost engagement and brand loyalty as the consumer feels special with the exclusive access.
(4). Turns New Customers Into Loyal Customers
Good clearance sales often draw many new customers, and they see it as an introduction to the brand. If they are happy with the customer service they get, they are more likely to turn into repeat and loyal customers.
Insights Into Running a Successful Clearance Sale
Planning a clearance sale is not just putting up discount posters; it is an art as well as a science which needs thoughtful work and effort.
Here are some best practices to use when planning a clearance sale:
- Chose the Right Products: Review your inventory in depth to identify which items are high in inventory level but low on demand or are outdated or seasonal or discontinued. Put them high up in your list for clearance.
- Set a Clear Objective: Jot down what you expect out of the sale. It can be immediate revenue, enhanced customer loyalty, or acquiring new customers. This will help in deciding the pricing and marketing strategies.
- Decide on the timeline: How long will the clearance sale last? For a week? A month? Or Just the weekend? Pinpointing the inventory targets creates a sense of urgency with the customers and also enhances operational efficiency.
- Effective Pricing: This involves determining how much discount you need to give on your products. Consider the product lifecycle, segments, competitors’ market, and market conditions for a good pricing strategy.
- Promote the Right Way: Use various communication channels such as SMSs, paid advertisements, emails, social media, website banners, countdown timers, pop-up banners, etc., to create a buzz for the sale.
- Chose a Suitable Clearance Sale Format: This is necessary to add value to the discounts. Sale can be in the form of markdowns, buy-one-get-one, bundle deals, flash sales, coupons, referees, buy-2-get-1, or other combinations to maximize the revenue.
- Create a Sense of Urgency: Various means and platforms can be used to tell the customers that it is a ‘once-a-lifetime’ opportunity and they will not get deals like this again.
- Provide Excellent Customer Service: Optimize the checkout process, state clear return conditions, follow up with the customers, and retain them for future shopping. Send the consumer a thank you note after the purchase, encourage them to join the customer loyalty program, or send them personalized messages and offers to build customer loyalty.
Conclusion
Clearance sales are much more than a way to reduce the excess inventory- it is an indispensable tool for generating immediate revenue and building long-term customer loyalty. By planning and executing it well through genuine discounts, creating a sense of urgency, and making the entire process a smooth and seamless one for the customers, even one-time deal-seekers will turn into a lifelong customers.
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