promotional pricingSay you pass by a suit shop every day on the way to work, twice a day – once on the way to work, and then again on your way home. This suit shop has never caught your attention, and you might not have ever even known there was a suit shop there at all. Even if you had, you still probably wouldn’t have stopped in anyways. Not that you don’t like to dress up every once in a while, but who’s got money for a suit right now anyway? But one day, on your way to work, you notice that the suit shop is having a sale – 30% off everything in the store! All day at work, you think about that sale, then you think about a suit… then the sale… suit… sale… suit… sale. On your way home, you pop into the store, get fitted for a nice three-piece number, a new tie, and some socks, and now you’re ready to take on the world.

What just happened was promotional pricing, and believe it or not, we’ve all been lured into purchasing something as a result of it. It’s one of the more effective marketing tools that a business can throw at you, the customer, and most of the time it works. Today, we’ll be discussing the various aspects of promotional pricing – how and why it works, as well as some of the flaws. To learn more about the world of marketing, check out this course on developing marketing strategies, then read this article on online marketing tools to get a better glimpse into this interesting industry.

How Does Promotional Pricing Work?

You already know that a sale is an example of promotional pricing, but let’s look at it a bit deeper. Promotional pricing, or marketing price promotion, is a cost setting marketing strategy in which a product or service’s price is lowered in an attempt to attract customers. As we mentioned before, this is most often exemplified as a sale, or a buy one get one free promotion. Now let’s move on to the other aspects of this sometimes effective marketing tool. This course on sales promotion will teach you more about the art of getting the word out.

Like the name suggests, the reasoning behind using this type of marketing tool is to promote, or attract attention to, a specific product, brand or retailer. More than just bringing people into your store, promotional pricing is meant to inform consumers that a certain thing exists, whether it’s a label, a line of products, or one specific item. Not only are they interested in getting people into a physical location, but by exposing them to this product, they are hoping to create loyalty in the consumer to the brand or to the seller, and if loyalty is achieved, then they will probably buy more products in the future.

We may just associate retailers as those who will drop prices to get more people to buy, but manufacturers take advantage of promotional pricing, as well. When a retailer uses this method, they’re trying to develop loyalty to them, the seller, in the hopes that people will come back to that specific location or chain to purchase something, no matter what it may be. On the other hand, a manufacturer is more interested in this tool to not only introduce a line of products and services to the public, but to make sure they’re aware of this new thing. This course on marketing communications has more info on the various forms of advertising, types of media, and forms of communications used in marketing.

Once it’s decided that promotional pricing is the appropriate way to inform the public about something, the retailer or manufacturer must then make a few decisions before carrying it out. First, by looking at the market value of a product, they can calculate how much of a discount they can afford to offer. Next, they figure out how long they are able to offer the product at that price, and that dictates the length of the sale or other promotion. Finally, the information is disseminated to the public via standard marketing techniques.

As you can imagine, the promotional pricing technique is not something that can be carried out in the long-term. The discounted price is rarely financially sustainable over the long haul, and they even expect to lose a little bit of money in the short-run, but feel that this loss will be balanced out by the future purchases of the customers they hopefully made during the promotion. Time-wise, promotional pricing may last anywhere from a few hours up to a month.

Promotional pricing will only be effective when occurring infrequently. If this type of thing happens too often, not only will consumers start expecting these lowered prices, they will think that the regular, non sale price, is much too high, and won’t purchase at this normal rate, unless there’s something special or different about the product.

The Flaws (And Benefits) of This Method

Other than some of the pitfalls we’ve already discussed above, there are a few other cons of the promotional pricing marketing tool, as well as some benefits. Those businesses that use this tool obviously hope for more of the latter than the former, but it doesn’t always work out that way in the end.



The world of marketing is really quite psychologically based if you think about it: companies play on the desires and insecurities of consumers in the hopes of making money. Promotional pricing plays right into that, making people think they’re getting a deal, but only for a very limited amount of time. To learn more about the habits of buyers, check out this course on predicting consumer decisions to find out what we’re all thinking.

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Transfer Pricing Fundamentals

Last Updated February 2021

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Understand the basics of the arm's length principle and international transfer pricing rules. | By Borys Ulanenko

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