How to Create a Discount Strategy for your E-Commerce Store

Richard Sutherland
May 7, 2019
E-Commerce Operations
Operaciones de e-commerce

Offering discount promotions is a common sales strategy both online and offline. Over 97% of retailers use discount pricing in their sales. There’s no doubt that discounts are a powerful way to bring in new customers or entice current customers to purchase more, but get it wrong and you’ll slice off too much of your profits or damage your brand.

People love getting a deal. It results in an instant feeling of gratification and happiness, a feeling that is a positive association with your brand forever.

Great! But discounts don’t always work this way for every brand. Studies have shown that for some brands and products, discounted rates cause the reader to perceive that the product on offer has lost its value. Some products should remain at a virtually constant price with only small discounts or the perception is that they are not worth as much as they previously had been and the price will not recover.

The other big issue can be if you discount your goods too much. If you offer discounts to people who were going to pay full price anyway, then you’ve lost out thanks to over-aggressive discounting.

What Is the Discount Meant to Achieve?

Blindly offering a 10% discount and hoping for an uptake in sales is a waste. Instead, focus on what each discount is meant to achieve so you can target the right people.

  • Do you want to increase your customer base? Offer a discount to new customers.
  • Getting ready to bring in a new season’s goods? Offer discounts on this season’s goods to clear out your warehouse in preparation.
  • Want to increase the sales you receive from your current customers? Offer a loyalty program.
  • Do you need to re-engage customers who haven’t bought for a long while? Use an exclusive discount code sent only to them.

The important thing here is that through personalized, targeted discounts, we’re incentivizing the right people with the right discount while not cutting into our normal profits.

Who Are You Hoping to Reach?

Your customers all have different needs and will react to discounts in different ways. Further segment your customers into how they might react to price discounts.

Some of your customers value product quality and service over pricing. They’ve purchased many times from you before, and they’re willing to pay more for something special. Discount prices won’t work too well on them. Instead, increase the amount they spend by offering complementary products when they buy from you. Offer them VIP services and free services to show them they’re a highly valued customer. Offer sneak previews of new products to build interest or gain pre-orders.

You also have customers at the other end of the scale who value price over almost everything else. They aggressively look for deals online and know when the price you’ll selling at is really a bargain. They don’t buy from you often, but they will do if you offer them a good discount. Prioritize discounts on clearance sales and low-priced items. Include time-urgency in all discounts to this customer, as they often need that extra push to finally buy.

These are just two of the types of customer you might be aiming your discounts at. Segment your customer base by learning everything you can about them and what they really want from your company. From there, create the perfect discounts for each.

Choose a Discount Format

There are a lot of ways to offer discounts on goods.

A set percentage discount is easy to understand but doesn’t jump off the screen. It’s also harder to work out a percentage on the fly, so the subconscious mind doesn’t always get juiced by a percentage discount. Set percentage discounts usually work better on inexpensive items.

Buy One, Get One Free (BOGO) offers attract more attention. People prefer to get things for free rather than get a 50% discount.

You can modify the BOGO offer by giving a free gift with a specific purchase. This is a great way to attract impulse buys and allows you to clear out items from your inventory that haven’t been selling well.

Bundled discounts work particularly well when you have a smart online store that tracks the type of items that are commonly bought together. Offer someone purchasing a sweater a 30% discount if they buy a matching pair of trousers and you’ll see the sales in each shopping basket rise. You can even bundle in items that aren’t selling so well to help shift them.

Protect your profit margins with a conditional promo. Essentially, add conditions to your discount promotions that guarantee you’ll still stay in the pink. “Buy 5 items for a 20% discount.” “15% off all orders over $100” keeps you in charge of the sales and stops them from running away with all your profits.

Limited time discounts are essentially a discount with a time-sensitive condition. Running a weekend sale or flash deal can encourage impulse buys.

Do the Math

For every discount you plan to offer, do the math and think about it from a psychological point of view too. Does 40% off sound better than $10 off? Does $100 off sound better than 5% off?

Every time you run a promotion, record how it has affected your number of sales and how it has affected your profit. Test different strategies, as no two brands are the same. Soon, you’ll have a discount strategy that is personalized perfectly for each visitor and improves your sales numbers without cutting into your profits.

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About the author

Richard Sutherland has worked in online marketing and search engine optimization for over 15 years. Excited about how we can offer the customer a streamlined, personalized online experience, Richard looks for every way to increase conversion percentages with a high return on investment.

Sobre el autor

Richard Sutherland tiene más de 15 años de experiencia en marketing online y optimización de motores de búsqueda. Apasionado por ofrecer una experiencia inteligente y personalizada a cada consumidor, Richard está constantemente buscando nuevas maneras de incrementar la conversión y, con ella, los retornos a la inversión.

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