In my opinion, ‘Buy One, Get One Free’ or BOGO (F) as it’s popularly known, doesn’t result in a reduced overall turnover for a company. Most of the time, it is part of the strategy of the company to increase sales. They want to increase volumes, and the cost of buy one, get one is built in the pricing. The offer always sounds good to the consumer and definitely increases sales and gives the company’s brand a positive push.
Often, companies also use BOGO for clearing their old inventory. For example, storing and maintaining unsold stock of garments often require significant inventory costs. So, buy one, get one is a good strategy for clearing old inventory and staring a fresh cycle.
Insights from a thorough analysis of consumer behavior and psychology are taken into consideration when planning such promotional activities. Typically, consumers are not happy buying a product, which they are aware, was cheaper in the past. With BOGO, selling two items for the price of one does not have the same effect on price psychologically, while in reality, the price is cut in half. Companies do it to keep their business profitable in the long run. They never lose anything in such promotional activities; only make fewer profits saving themselves from the loses they would have incurred otherwise.
From a business point of view, this can be a move to aggressively obtain market share and then eventually raise the price of the concerned item by two folds in the future. If a company’s branding is better than the competition, then this might be an effective method. Also, a company can benefit from BOGO when its competitors fail to make good use of this scheme.
On the flip side, it may hurt a brand’s image when a luxurious item is involved, such as highly expensive perfume or similar expensive commodity.
When it comes to execution, marketers say such promotion devalues the brand, but secretly, the sales people love it because it boosts turnover. For example, Coca-Cola has 40% of its volume on deals, while Walkers has up to 60%, and they need the retailers’ shelves to make their promotions work.
- High Value of Sales – Ensure higher sales and thus increase the average order value.
- Simplicity of Sales – Products consist of several single items but are actually sold as one unit.
- Imposed Options – Customers may not need all the included items and might consider them to be imposed, not willing to pay additional costs for them.
- Inadequate Price Transparency – customers might refuse bundles in favor of separate products, where they can see all the prices.