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8 ways to give discounts that don’t cost you your profitsA sick discount can make a huge difference in conversions, it’s not to be denied. If your discounts are too generous, frequent, or broad you could lose money and even attract a different audience (e.g. deal seekers) to what you intended. You may also find sales hard to come by if your discounts are too generous. This post will help you solve the problem of eCommerce discount strategies. How to create a discount strategy that will benefit your business, without compromising your bottom line.
What is a discount pricing strategy for retail?A discount pricing strategy refers to a deliberate decision not to list or advertise a product or sell it at a lower cost. Also read: Pricing strategy handbook For clearance items, discounts can be either temporary (for new products) or permanent (for existing items). You can have them in different forms, such as free shipping or percentage off. While we’ll be discussing specific pricing strategies in a moment, let’s first discuss some possible scenarios for discount pricing.
What is the best time to offer a discount?
Your goal is to get new customers to buy.Discounts can not only attract attention to your website, but they can also encourage customers unfamiliar with your brand and make them purchase their first product. If you are selling in a competitive market, or if your online store is new, discounting can be very helpful.
You want to increase customer loyalty and shopper engagementFor organic marketing or repeat purchases, a competitive pricing strategy could be a good incentive. You might offer discounts to customers who refer friends and family. You might also consider launching a loyalty program, which offers discounts, gifts, and other incentives depending on how many times members shop with you.
Clear out your old inventoryA discount can increase inventory turnover to make way for new products and clear out excess inventory.
When there is high demand, you want to increase salesDiscounts can help you gain an advantage during holidays and other highly competitive selling events like Prime Day. These events have a “halo effect,” which means that the excitement generated by the promotions has positive ripple effects on other merchants (read: even if your business is not directly connected to the event, you might see an increase in traffic and sales). These weeks can also be a good time to get discounts. A retailer selling candles may offer discounts after the holidays, while a sporting goods store might offer coupons towards the end of a regular season.
Four key considerations for any discount strategyThere are many ways to discount prices. Your business goals and product lines should guide your strategy. There are some guidelines you can follow when planning for a discount.
01. TimingWhat is the peak and lowest demand for your product? Or when does the buyer’s interest tend to plummet? Consider when customers are most likely to look for discounts or how discounts can be used to close the deal. Take a look at your sales history to see how competitors use discounts to their advantage.
02. The messageA discount can be a motivator or deterrent. Jonah Berger is a Wharton marketing professor and author. He advises retailers to use The Rule of 100 for advertising discounts. Berger says that consumers can be more motivated to buy when there are subtle ways to present the same information. Let’s take, for example, the $30 list price for a candle, and the $22.5 discount. You can present the discount as “$7.50 off” or “25% off” depending on what you prefer. The Rule of 100 states that a percentage is more attractive to consumers than a fixed amount. This applies until an item’s listed price exceeds $100. Fixed fees are more appealing than a discount on higher-ticket items like smartphones. If the $850 price for a phone is $595, then you should present the discount as a dollar amount and not a percentage. For example, $255 off a smartphone that costs $850 would be 25% off. Both cases will result in the customer paying $595 for the phone. However, they are more likely to take advantage of the discounted price if the offer is presented as absolute dollars saved.
03. The productYour discount strategy should be based on the product type you are selling. Avoid deep discounts if you want to build a luxury brand. If you’re selling a popular item you may need to offer a higher discount in order to remain competitive. This will make it more attractive to customers to shop at your store rather than a vendor they are familiar with. When you do this, make sure you are not violating any MAP policies.
04. Your costsYou must also consider the cost of shipping, manufacturing, and packaging your product. According to the Boston Consulting Group, it’s easy to lose track and spend too much on promotions. This problem affects 20% to 30% of retailers. The same study found that promotions are not effective in generating sales growth for 20% to 50%. Retailers are reluctant to reduce the number of these promotions because they aren’t sure which ones work and which ones don’t.
8 types of Discount Pricing (with Examples)Discounts can be a great way to attract new customers and delight existing customers, provided you do your research. These are eight discount strategies you can incorporate into your eCommerce Marketing strategy.
01. Quantity DiscountCustomers who purchase certain quantities of your product may be eligible for a discount. You could offer multipacks, BOGO (buy-one-get one) promotions, and special pricing for bulk orders. Customers will be motivated to buy more products than they originally planned. This is the “five-for-25” strategy that Victoria Secret and Urban Outfitters use to sell relatively low-priced products. As shown in the below example, Wix merchant Coal or Canary encourages larger basket sizes through a minimum order requirement.
02. Price breaksVolume price breaks are similar to quantity discounts, but they can be applied to larger orders. To get a 10% discount on the total price, customers may be required to buy at least 10 items. They can still receive a 5% discount on orders of eight or more items. Each checkpoint comes with its own price break.
03. Bundle pricingBundling related products can increase the average order value (AOV) and reduce the price per unit of the individual items. Bundles that double up are a great way to promote gifting, especially during holidays. If you have a beauty brand, for example, you might create a spring nail package that includes pastel nail polishes and nail-care tools. You could also create “starter packs” or bundles featuring products from the same product line. MightyNest is an eco-friendly retailer that offers a plastic-free utensil kit. Customers who sign up for their loyalty program receive additional discounts from MightyNest. This leads us to our next discounting strategy: stackable discounts.
04. Stackable discountsYou can offer stackable discounts in many ways that will encourage buyers to use their credit cards to make their purchases. You can also offer multipacks and bundles in your catalog. This will allow loyal customers to enjoy additional benefits at checkout, such as free shipping and 15% off for MightyNest members. A second option is to offer free shipping if you order a minimum amount. For example, orders above $50 qualify for free shipping. Customers can also apply rewards, coupons or credits for discounted items at checkout. A stacking discount strategy is a great way to achieve multiple goals such as increasing AOV, loyalty, and encouraging repeat sales.
05. Lightning deals and flash salesFlash sales are a sale that is only available for a short time. This discount encourages impulse purchasing. This discount can give customers the push they need to buy when they are on the fence. Flash sales can include promotions for new products or 24-hour discounts on hot-selling items. Lightning deals are like a flash sale with steroids. Lightning deals are extremely limited-time deals that offer a steep discount on one product (think Amazon Lightning deals). These are a great way to increase sales when traffic is slow, or to clear inventory. You must ensure that you have enough stock to satisfy customer demand. Otherwise, your sales could backfire and you may oversell. This could lead to customers feeling disappointed.
06. Loyalty DiscountsThis discount is usually offered to customers who make repeat purchases or are members of a loyalty programme. You might offer 10% discount to customers who have bought from your store at least three times in the last year. You could also offer free shipping to your newsletter subscribers or VIP club members, which Wix merchant Vivia et Margot does. Customers who refer their friends and family can receive loyalty discounts (e.g. $10 off your next order for referring a friend).
07. Discount for new customersTo encourage first-time customers to try your brand, and/or return for future purchases, a new customer discount might be offered. You might offer 10% off your first order, or a welcome gift to new customers. You’ll need to communicate your offer clearly and make it easy for customers to redeem your offer. This will ensure that they leave with a positive impression of your brand.
08. Discounts based on your individual needsA personalized discount is one that’s customized to each customer based on their purchase history, browsing habits, or other factors. You could offer 10% discounts to customers who frequent your site or search for certain items. You can also use personalized discounts to encourage certain behavior, such as buying within 24 hours after adding an item to your cart. source https://www.wix.com/blog/ecommerce/2022/06/discount-pricing-strategy
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