Diwali is believed to bring prosperity not just to households but to businesses as well. The jump in sales and rush in shops is what no business owner dislikes. However, along with an increase in business profits, the pressure also increases. Customers look for festive deals, retailers compete on prices, and businesses may feel tempted to offer bigger discounts to attract more buyers. The issue starts when festive offers increase sales but lead to lower overall profit rates.
For instance, suppose a retailer is selling a festive gift box for ₹1,000. If the product is sold at ₹700, the business earns ₹300 before other expenses. Upon offering a 20% discount, the selling price comes down to ₹800, leaving only ₹100. Sales may rise, but the profit on each box has fallen sharply.
This does not imply that a business should avoid festive season discounts. The purpose here is to plan everything in advance and have a concrete roadmap. Businesses need to understand the numbers behind each deal and track the results while the campaign is running. With a clear discount policy and accurate sales reports, businesses can attract customers without giving away more profit than necessary. This guide explains how to plan Diwali offers and a festive sales promotion strategy.
Review product costs and profit margins
The ideal way is to check how much each product actually contributes to the business before announcing an offer on it. The selling price alone cannot determine if you can announce an offer on it. For this, you also need to know the purchase cost behind it, direct expenses, and the margin available on that product.
You can begin by reviewing the cost and the selling price of the products you want to announce offers on. Include expenses that directly affect the cost of getting an item ready for sale, where applicable. For instance, a gift hamper may contain several products, packaging material, and decorative elements. If you only look at the cost of its contents, the offer could appear more profitable than it really is.
Moving forward, the club will differentiate products depending on their margins and demand. A popular item with a healthy margin may support a modest discount, while a product with a narrow margin may need a different promotional approach. It can be a good idea to clear older stocks even at a lower margin. However, the decision should account for how much the business can reasonably recover. A simple product review can help:
- High-margin products
Consider limited discounts or bundles that encourage customers to buy more.
- Low-margin products
Avoid deep price cuts unless there is a clear business reason.
- Slow-moving stock
Consider targeted offers to free up working capital and storage space.
- High-demand products
Check whether a discount is necessary at all, particularly if customers are already buying them at full price.
Make sure to review costs whenever the supplier applies a price change. The same product that had a 10% discount last month may not be at the same cost this month, leading to a different discount percentage this month. Current figures are a safer basis for festive pricing than last season's assumptions.
Set discount limits before launching offers
Once you have an understanding of the margins on chosen products, it becomes easier to decide how much discount you can offer. Setting limits before the campaign begins helps with Diwali sales management and assists staff in responding to customer requests without making unplanned price cuts.
It is crucial to note that there is no standard discount percentage that suits every business. A retailer selling products with healthy margins may have more room to negotiate than one selling essential goods at competitive prices. Your limit should come from the numbers, not simply from what nearby stores are advertising.
For example, a shop may extend up to a 5% discount on select items, 10% discounts on those with higher profit margins, and varied offers on old stock. So, these rates are just illustrative and not a standard one-size-fits-all percentage. The right figures depend on costs, overheads, and the business's profit targets. A written discount policy should clarify:
- Which products qualify for an offer?
- The maximum discount allowed on each product or category.
- Whether discounts can be combined with coupons or other promotions.
- Who can approve an exception?
- The start and end dates of each offer.
You also need to calculate the impact of a discount before announcing it. Suppose a product costs ₹600 and sells for ₹1,000. Its initial gross profit is ₹400. A 10% discount reduces the selling price to ₹900 and gross profit to ₹300. The discount has reduced gross profit per unit by 25%, even though the customer receives only a 10% price reduction.
That difference is easy to overlook when a team focuses mainly on the discount percentage. A short calculation before launch can prevent a costly promotion.
Choose the right products for promotions
You don't have to offer a discount on every product during Diwali. Applying the same offer across the entire catalogue may reduce profit on items that would have sold at full price anyway.
Start by looking at the discount rates offered during the last festival, checking recent customer inquiries, and checking current stock levels before choosing promotional products. For instance, a retailer might find that decorative lights, sweets, and gift packs sell quickly, while certain home décor items remain on the shelves. Each group may need a different approach.
You may consider products with high demand for value-added offers instead of cutting prices heavily. A gift wrap service, complimentary packaging, or a useful low-cost add-on may improve the shopping experience without reducing the main product's selling price as much.
Not to forget, promotions can also help push products that need attention. If there is a specific design that is selling slowly, a targeted discount may make more sense than reducing prices across the entire category. However, check the reason behind weak demand first. If the product is damaged, outdated, or poorly suited to customers' needs, a discount may not solve the problem. Before finalising the list, ask three questions:
- Is the product likely to attract additional sales because of this offer?
- Is there enough margin to support the proposed discount?
- Will the promotion help meet a specific goal, such as clearing stock or increasing the average bill value?
If there is no clear purpose for an offer, it may only reduce your revenue on sales. You may also use inventory management software to keep track of everything.
Plan bundles, volume offers, and seasonal deals
During the festive season, you don't always have to offer discounts on single items. You may extend bundles, volume-based offers, and carefully chosen seasonal deals to encourage larger purchases while keeping the overall economics in view.
- Product bundles
They bring related items together at a combined price. A shop selling diyas, candles and decorative accessories could create a Diwali décor pack. The customer gets a convenient set, while the retailer has an opportunity to sell complementary products in one transaction. Before setting the bundle price, add up the cost of every item and any extra packaging.
- Volume offers
They reward customers for buying more. For example, a retailer might offer a lower per-unit price when a customer purchases six pieces instead of two. This can work for sweets, stationery, packaged goods, or corporate gifting orders. The discount should be worthwhile for the buyer without making the additional units unprofitable.
- Seasonal deals
They can be tied to a time period or a particular customer need. Early-bird offers may help businesses secure orders before the rush, while clearance deals can help move festive stock after peak demand. Limited-period offers also need clear conditions so customers and staff understand when they apply. Compare the cost and expected benefit of each option before choosing one.
|
Offer type |
Possible benefit |
What to check |
|
Product bundle |
Possible benefit |
Total cost and margin of all items |
|
Volume discount |
Sells complementary items together |
Profit on the full quantity sold |
|
Free item |
Encourages larger orders |
Cost of the free product |
|
Limited-period deal |
Adds perceived value |
Whether the offer brings additional sales |
|
Clearance discount |
Helps move slow stock |
Recoverable value and remaining margin |
If you are extending offers such as “Buy One, Get One Free”, be a little more cautious. Here, the customer pays for one item and gets two. You need to be careful and calculate the profit on the combined quantity, not just the billed item. The same principle applies when a business gives away a gift with a purchase. Profit and sales reports can help you keep a tab on the ongoing revenue updates.
Track sales, returns, and promotional costs
Once you have announced the Diwali offers and they are live, monitor activity during the sale. A promotion that appears successful in terms of revenue may be less attractive after accounting for returns, delivery expenses, and advertising costs.
Make sure to record and note each sale with the right product, its selling price, and discount. Keep track of returns and refunds as well. If a customer returns an item purchased under a promotional offer, the business should account for the return correctly and check whether the related stock is fit for resale.
Promotional costs deserve equal attention. Advertising, influencer fees, extra packaging, temporary staff, and delivery subsidies can all affect the final result. If these expenses are left out, a business may overestimate how much it earned from the campaign.
For instance, a retailer may sell ₹2 lakh worth of products during a Diwali promotion. That figure alone does not reveal whether the offer was worthwhile. The retailer needs to consider the cost of goods sold, festive season discounts, returns, and the expenses incurred to attract and serve those customers. Maintain a simple daily record of:
- Total sales and number of bills.
- Discounts given by product or offer.
- Returns, refunds, and cancelled orders.
- Promotional and delivery expenses.
- Stock sold and stock remaining.
Businesses using TallyPrime can review sales transactions through its Sales Register and examine invoice-level details. TallyPrime also provides options to record sales with discounts and free items, helping businesses maintain records of promotional transactions. See the official guides on recording sales in TallyPrime and sales with additional charges, discounts, and free items.
Accurate entries in billing software make it easier to compare the campaign with normal sales and identify where the money went.
Measure promotion performance
At the end of each day or at regular intervals, check whether the promotion is delivering the expected results. The right measures depend on the campaign's purpose. A clearance offer should be assessed differently from a bundle designed to increase the average order value.
Start with gross profit, not sales revenue alone. Gross profit is broadly the difference between net sales revenue and the cost of goods sold. To understand the campaign's overall contribution, also account for relevant promotional and operating expenses. A few useful measures include:
- Discount amount: How much was reduced from the normal selling price?
- Gross profit: How much remained after accounting for the cost of goods sold?
- Average bill value: Did customers spend more per transaction?
- Units sold: Did the offer increase the quantity sold?
- Return rate: Did the promotion lead to more returns or cancellations?
- Stock clearance: Did the offer help move the items it was designed to clear?
Suppose a retailer sells 100 units at a gross profit of ₹200 per unit without an offer. Total gross profit is ₹20,000. During a promotion, the retailer sells 150 units, but gross profit falls to ₹120 per unit. Total gross profit becomes ₹18,000. Sales volume has increased by 50%, yet gross profit is lower.
This example shows why higher sales do not automatically mean a better outcome. If the promotion brings in new customers, clears stock that would otherwise remain unsold, or encourages repeat purchases, those benefits may matter too. However, they should be assessed rather than assumed.
TallyPrime's accounting software can display sales data for different periods and provide invoice-level gross profit information, subject to the details recorded and report configuration. Businesses can use this to compare performance across dates and investigate which transactions contributed to the result.
Review results after Diwali
When the festive rush ends, review each offer separately. Avoid judging the entire campaign by one headline sales figure. A bundle may have performed well, while a broad discount reduced margins on products that were already popular.
Compare actual results with the objective set before launch. If the goal was to clear old stock, check how much stock was sold and what margin remained. If the goal was to increase average bill value, compare transaction values before and during the offer. For a customer-acquisition campaign, examine whether new buyers returned later, where reliable data is available.
Also, review what did not work. Did a discount attract bargain hunters without encouraging repeat purchases? Did a free gift cost more than expected? Were customers confused by offer conditions? Did the business run short of popular items while slow-moving products remained unsold?
Use these findings to prepare for the next seasonal campaign. Keep a record of the offers that delivered a useful return, the products that comfortably supported discounts, and the expenses that you underestimated. Update price lists and internal approval limits where necessary.
The aim is not to avoid discounts altogether. It is to ensure each offer serves a business purpose and to understand its financial impact before repeating it. That way, festive promotions can support sales without becoming an unnecessary drain on profit.
