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Let me see if I can answer this.
The main way companies make money is by selling something, be it a service or a product.
Promotional deals offer cheaper prices or free objects to people.
On the surface, giving away a free product or offering something for 20% of its normal price seems absurd. However, think of it this way: people like deals. People love discounts and bargains. As such, they are more likely to buy something if they can get it for a cheap price.
How does this benefit a company? Simple, to get the deal, people have to visit the store. Once they're inside, they are MUCH more likely to see something else that they want to purchase. Stores openly display all their best products to people who pass through the store, strategically placing them to increase the likelihood that people will notice them and buy them. All this preparation goes to waste if the shoppers never enter the store.
A store could offer the best product in existence, but if nobody shops there, the store won't make any money. To increase the amount of customers, stores offer promotional deals, discounts, and free stuff.
Simply put, stores, companies, and services use promotional deals to get more customers. More customers means more money.
But wait, won't the stores lose money off of their discounts? Actually, no they won't. The retail price you see for products in stores is exponentially higher than the price it costs to make it or purchase it from a supplier. As such, even when they shave massive discounts off of the retail price, they're still making money, even if it's a little bit less than normally. On top of this, the discounts don't last all year. If a person buys a product during a discount sale, discovers that he loves it and wants another one/more, he'll go back and, probably, pay full price for the new one.
All in all, promotions are a win/win situation for companies and stores. They're still making money off of the products and services they offer, and people are visiting their location, making them more likely to sell some of the other stuff that they offer.
I hope this answers your question.
-Tharivole
Wiki User
∙ 12y ago
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