Why trade-ups are the secret to increasing sales

Steve Gales, sales director at Opia gives Talk Retail the lowdown on how thinking about the lifecycle of a customers purchase can help electronics retailers generate a significant sales increase from within their own customer base. 

Head to any electronics retailer – whether online or on the high street – and you’ll find a wide array of PCs, laptops, tablets and smartphones. To try to encourage change, many retailers advertise trade in offers. Unfortunately, these concepts rarely deliver for the retailer or manufacturer as there is typically no connection between the old and the new. Instead, more often than not, these types of deals mostly benefit firms that recycle old electronics, who will pay the consumer disappointingly low prices before selling the goods for as high a price as they can get.

Which is exactly where the ‘trade-up’ concept represents a much more attractive alternative. Working directly with manufacturers or retailers of hardware, specialist promoters incentivise the purchase of the new by temporarily inflating the value of the old, easing the transition for the customer and driving change. In this model, which is effectively a ‘cash back with conditions’ – i.e. buying a customer’s old equipment within a set timeframe, the customer gets the real value of their device plus a subtle cash incentive that can help persuade them to buy from the same manufacturer or retailer, rather than a rival brand.

As well as appealing to those actively seeking a new device, this type of smart promotion also encourages customers to refresh their gadgets and spend money more frequently, which means higher sales volumes, better margins and happy customers to boot.

Cash back buyers

In store, cash back offers are a particularly smart way of boosting sales of premium brands. Rather than following the traditional route used by retailers – i.e. selling new items at the recommended retail price then gradually lowering the price over time – cash back, trade-in and trade-up help move inventory and maintain a price position for longer, while also giving customers a great deal and, crucially, generating more of an incentive for them to buy.

Experience shows that creating a deal that speaks to and excites would-be customers is far more effective at generating significant sales uplift. The fact that both propositions cost the same illustrates why cash back is a much more efficient way to drive sales.

As well as making a significant contribution to increased demand and margins, for the retailer, these types of engaging sales promotions also present a good opportunity to develop direct relationships with consumers.

In most cases, retailers that use creative sales promotions as a cost-efficient way to drive volume are also looked on favourably by key manufacturers. From Easter cash back bunnies to incentives linked to the outcomes of a major sports event, creative thinking can spark the imagination of a buying public that have a good idea of what device they want to buy but are weary of having to shop around for the lowest prices. Meanwhile, a risk-managed promotion opens the door to a scale of risk that retailer’s and manufacturer’s P&Ls would normally reject.

Coming back for more

For the smaller, independent retailer, capitalising on a manufacturer’s marketing budget could be a good bet. This would help the manufacturer to optimise their promotional accrual and generate sales for the retailer. Meanwhile, customers that feel they received a good deal are more likely to buy from the retailer again, as well as being more open to future cash back and other promotions.

In the shift away from discounting, consumer electronics campaigns targeting teens, students and the working age gadget generation are also moving towards generating future value and customer loyalty. In this case, for instance, the manufacturer or retailer may guarantee an attractive buy-back value on their customer’s purchase price when they upgrade a phone, laptop or tablet within a set time.

As well as deterring them from shopping around, this also locks them into a shorter, more profitable refresh cycle, benefitting the consumer, the manufacturer, the retailer and the market as a whole.