Happy hours for retail and service business - how to use flash sales for your business? Step-by-step happy hours strategy and inspirations.
What is Happy Hour?
We can first trace ‘Happy Hour’ back to the 1920’s, the age of prohibition, when sailors in the Navy began to use the phrase to designate the time when they could take a break from their everyday duties onboard and just chill out. The phrase then spread to civilians who would drink before going to dinner. We can think of this as pre-gaming, except alcohol was illegal back then.” Source - the quick and dirty history of happy hour
The habit of drinking after (or during) worktime evolved and persisted, strengthened by the prohibition time. In the 1960’s, restaurants and pubs started using the term “happy hours” to describe a temporary (usually hourly), regular discount on drinks that was supposed to attract customers in off-peak hours (usually, after-work hours).
In the 1970’s, restaurants started adding food to their happy hour specials. Since then, the happy hour has basically evolved to a happy couple of hours - it can take up to 4h (usually either lunchtime or evening hours).
It is not a surprise that the concept of happy hours has become a global trend:
- Customers love it - they can save money on going out (and socialize more often).
- Companies love it, because:
- It is a source of additional income.
- It helps to have a steady stream of income (to boost off-peak hours).
- It generates more buzz about the company...
- ...which can help to get more brand awareness and brand love;
- or, even better, to convert their current customers into brand evangelists (here is a useful post from Forbes on why you need a brand evangelist, by Neil Patel).
What kind of businesses (services, products) can benefit from happy hours?
Previously, the “happy hour” concept was used only by restaurants and pubs, in the hours when usually there were fewer clients - the afternoon gap between lunch and dinner - to generate additional income with drinks and snacks.
The main idea of happy hours, for the entreprise, is to turn off-peak hours into their asset and create additional profits in that time. Therefore, almost any business that is seasonal/periodical can benefit from such approach.
Inspiration 1: Coffee
Drinks is where it all started, right? Why not extend the happy hour drink list to Frappuccino?
Inspiration 2: Cinemas
Cinemas have noticed that people go to the movies mostly on the weekend/close to the weekend (Thursday, Friday) and they’ve come up with “cheap days”. It depends on the country and on the cinema - sometimes it is Monday, sometimes Wednesday, sometimes weekend morning (some cinemas host weekend morning shows for children). The most common cheap day seems to be Wednesday. The discount is either a fixed-price ticket for everyone or a fixed-percentage discount off all tickets.
Cinemas got even more clever when they started organizing movie marathons (4-5 movies all night long, one ticket, the price per showing is -30% but you have to stay awake all night long). Great idea to make use of the establishment even at night!
Inspiration 3: Electricity companies (differential tariff)
Power plants have to work all day, all night (switching them on/off is not possible as the effort of starting them again in the morning is too high and energy is not easy to store). People use the energy mostly during the day. Energy produced at night is usually a huge loss for the electricity company (and the nature!). Many electricity companies have implemented a “cheaper” night tariff - all energy used at night is priced lower than that during the day. It encourages people to use the energy at night (off-peak season). It does not give additional revenues to the electricity companies (the same people would have used the same energy, just during the day) but it does help to reduce energy waste and to be compliant with environmental directives/law.
Inspiration 4: Gyms (and other sports facilities)
Have you ever heard of gym passes that are cheaper in the morning hours/on the weekends? The gyms also have peaks (Mondays, Tuesdays), when there is not enough space in the classes/on the machines, and lows (mornings, weekends), when the gym is empty because everyone is busy (or simply sleeping).
There are specific memberships which let you enter the gym in the off-peak hours only (not in every gym but the number is increasing), for a lower price.
Inspiration 5: Transport
Mornings are usually busy (people going to work), days quite slow, afternoons and evenings busy again (people going from work to home, going to the airport, going to parties/coming back from them).
Over the years, users of Uber, Lyft, Taxify, Cabify, and other on-demand rideshare apps have griped about the dynamic pricing that kicks in whenever there are periods of high demand. But that’s partly because dynamic pricing only ever caused prices to go up.
Uber, Lyft, Taxify, and Cabify are trying to change the view of the customers with the launch of “Happy Hour,” a pricing model that lowers prices in times of low demand. On average, the price cut vs. the older model is 10-50% for all companies. Rules of promotion are different per company;Cabify went completely off-stream in Portugal, giving Strongbow cider to passengers during happy hours.
Inspiration 6: Retail
Auchan Hungary has introduced the “pensioners’ day” on Mondays and the “big family day” on Fridays when all customers with the Auchan loyalty card get a 5% discount. Happy retail days! Although this promotion lasts more than a couple of hours, the mechanism is the same - discount (or special deals) for a targeted group of users for whom those are the off-peak days for shopping. Lowering down prices in Auchan just for one day would be impossible, as well as having control over who is eligible for the discount and who is not. Having a “customer profile” saved in the loyalty card (thanks to the CRM system they use), they can easily identify which customers are eligible for this in-cart discount. The simple and easy execution of the “happy day” is offline (they could apply online as well, with the loyalty card number validation, but the concept is quite new and they have not gone online with it yet).
Auchan is still far behind the US giant - Walmart uses dynamic pricing and changes its product prices almost 50,000 times a month.
Some of the clothing companies try with “flash sales” - a temporary discount for all or for chosen products.
Inspiration 7: Hotels (hostels, B&B, and others)
Flash sales, seasonal sales, and off-peak season sales of the hotel bookings are an emerging market. Currently, some of the booking sites are running so-called “dynamic pricing” known from airline industry - they are pricing the rooms based on the current demand and the amount of already sold out rooms at the moment of booking.
Examples: Airbnb (that suggests the landlords prices for specific seasons based on historical data), Booking.com (dynamic pricing), AccorHotels.
The discounted prices are visible on the website (a specific discount for all the products), not only in-cart.
Inspiration 8: Airlines
Flight fares are rather about dynamic pricing than happy hours; the prices are a reflection of the demand for the flights.
Additionally, there are seasonal sales of tickets which are either launched because of specific days (usually on holidays) but they also happen more and more often once the company notices the sales are low and tries to top them up. Example: Wizzair:
The discount is added in-cart, on a selected route, although the prices are shown on the website already with the discount applied.
Inspiration 9: Banks
Banks in Poland are said to be the most modern in Europe (see mBank - one of the first online banks and the best mobile apps).
Happy Hours on a money saving account (a higher interest rate % if you put your money on a saving account in specific hours/on a particular day) by Millenium bank just confirms the rumours.
Are customers fine with changing prices?
As many as 65% of consumers are open to price changes throughout the day, especially if a product is reaching a sell-by date, according to a new report by Displaydata and Planet Retail RNG. And about half, 52%, are open to dynamic pricing if it is to price match, even though 25% of retailers are not convinced that customers will accept these price changes.
How to implement happy hours in my business?
- Check whether your business has a need for it. Are your sales seasonal? Do you have off-peak seasons (or hours)?
- Check if your product/service could be potentially purchased by your customers and what the reasons for the seasonality are. If the product/service can be used in the off-peak hours and there is demand for it (just less willingness to purchase it at that time), go for it!
- Define the target audience that has the possibility to use your product/service in the off-peak hours. Some of the people will not be able to purchase your product or service in the off-peak hours just because it is not possible for them (example: language classes for kids during obligatory school classes, not possible to sell).
- Prepare the pricing model for the happy hours (or days) that will bring you profits even after lowering the prices. Do not go below the costs, it might bring you losses and it is illegal in some countries. Remember also that the discount has to be motivating enough for the target audience to purchase your product/service in a time that is usually not suitable for them.
- Prepare the technical setup for lowering the prices and applying the discount for the customers. There are a couple of options available:
- Changing the prices for all articles/services directly in the price list (online, on the shelves, in the catalogue) just for those couple of hours. It helps with communication of the sale but is extremely hard to implement. Example from the above article: Walmart.
- Dynamic pricing (based on demand) - it is easier to implement online but still, it needs a powerful database to discover the right pricing and apply it on the website - it might be costly and hard to implement. Example from the above article: Wizzair.
- In-cart discount (directly applied for all customers) - can be communicated by banners, it is easier to set up either in your e-commerce/shop or with an API (like Voucherify). Example from the above article: Crocs.
- Discount code at the check-out. Easy to set up and communicate, a bit harder for the customers to use than a direct discount but can be personalized per channel/customer cluster and give you more insights. Can be applied if your e-commerce has a built-in option for personalized discount codes or with the API like Voucherify. You can read more here.
- Lowering prices only on selected items/services (easier to implement than for all articles but still needs a manual setup).
- Granting the discount in loyalty points/vouchers to be reused on the next shopping in the same store (not only happy hours but also a loyalty program). Can be set up with the help of Voucherify in your e-commerce.
- Prepare the communication (which message, which visuals, which channels, when will you advertise it to your customers)? It must suit the target audience you’ve chosen.
- Measure your success and optimize the discount. Redemptions of the discount codes/vouchers/sales during the happy hours have to be measured to be able to decide whether this promotional model works for your business and for your customers. When you set up the promotion technically, make sure you have the needed tracking available on your platforms.
Get creative with your business! This article has already covered many inspirations from different industries that can benefit from happy hour/flash sale/dynamic pricing models but there are so many other businesses out there! Hairdressers, massages, manicure salons, spas, healthcare (dentists? physiotherapists?) - there are so many services that face seasonality or daily off-peaks during working hours. Introducing special pricing for that time can convince the customers to take those hours off work and go to your salon, can encourage those currently not working (students, work-at-home mums, or those looking for jobs) to come to you in off-peak hours and generate more revenue.
Do not fret about setting up the pricing on your website - Voucherify is always happy to support you and your business and to work out the best technical solution for you.