8 Discounting Strategies for Ecommerce Companies

By Moira McCormick on July 11, 2017

8 Discounting Strategies for Ecommerce Companies

It might appear at first glance that offering discounts are not the surest way to make your ecommerce business more profitable. Indeed, if you approach discounting without a clearly defined plan, or the tools to evaluate whether it’s working and the wider impact on your business, you might just regret ever attempting a discounting strategy!

However, if used in an appropriate and intelligent way, discounts can be a powerful addition to your ecommerce armoury.

 "Discounting is a strategic issue for any ecommerce business and needs to be approached with the right methodical mindset."  Aran Reeks

 

You don't need me to tell you that selling online is highly price sensitive so it's essential that you have a clear pricing strategy to start with that includes intelligent and well planned discounting

Some strategies to consider:

1. Firstly, what type of discount?

In reality, there are only three types of discount: 

  • A percentage discount on a product
  • A cash amount discount on a product
  • Selling a product for a fixed, reduced price

It becomes more tricky when you start to think about setting up the discount's conditions:

Will it be something like these for example?

            “spend £50 and get …..........”

            “buy any 2 products  ...........”

            “enter the discount code SUN17 at checkout” ...............

You then need to determine what elements get discounted when the above conditions are met:

Will it be?

     … to get free delivery

    … to get another one free!

    … and get 15% off your entire basket

If your eCommerce platform offers you the ability to control the conditions and application of discounts then you can start to adapt your discounts to produce maximum benefit for your business.

The most popular discount strategies are:

  • Free delivery - a one-off offer or triggered when you spend above a certain amount
  • Specific cash amount discounts
  • % discounts
  • Multi-buy and volume-based discounts - which can also be linked to free delivery
  • Combination offers - buy several items together from a selected range at a special price
  • BOGOF (or variants)
  • A discount on your next shop
  • A free gift above a certain spend

Discounts can be applied to an entire basket or individual items and they can be time-limited. You can also trigger a discounted price on an item when a related product is placed in the basket.

 

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2. Don't demean your brand

Resist applying discounts indiscriminately across your products to create more sales because this may have a detrimental effect on your brand. Your reputation could depend upon this. Discounting too frequently can damage your brand’s image and impact the perceived value and quality of your product(s).

 

3. Discount codes

Retail discount codes have been growing in popularity for years. A Google UK search for ‘voucher code’ shows 50.4m results. “Discount code” gives 1.29bn results.  Clearly, they are popular with consumers and retailers alike. Online retailers that do issue coupons benefit in the following ways:

  • They create shopper loyalty
  • They help bring in new customers
  • They promote newly-launched products and under-used services
  • They encourage first-time product trials
  • They allow offloading of excess stock – customers may share the codes with friends so you'll get rid of excess/old stock twice as fast they are easily tracked and tested

 

4. Incentive discounts

Incentive discounts typically demand specific action(s) from your customer before they are available.  An example would be where you automatically apply a 10% discount to a customer’s purchase if he or she first share your product on Twitter.

This type of discount is designed to reward their favourable behaviour, usually something that benefits and promotes your company in other ways.

The best thing about incentive discounts is that if you use them intelligently you benefit much more in return than the discount’s monetary value would suggest.

 

5. Discounts as rewards

Your ultimate goal with discounting strategies for ecommerce should be to create more customers, who in turn create more revenue.  

Offering discounts as rewards are not only something that can be used on new customers but also existing customers.  You are probably familiar with the following examples:

    “Share with Twitter friends for 10% off your next purchase!”

    “Join our email list for exclusive discounts and promotions.”

    “Renew your membership and receive a 20% discount.”

    “Refer 3 friends and get 50% off your next purchase!”

All of the above strategically offer a discount once an action is taken – and the action is usually more valuable than the discount!

You'll fully appreciate that onboarding a new customer is usually more expensive than retaining a customer.  Similarly, returning customers tend to develop trust and brand loyalty once they’re onboard.  Offering a 30% discount on a customer’s first purchase could open the door to a customer lifetime value far greater than the initial discount you offered.

Does it sound like a game of strategy to you?  Well, your eCommerce marketing efforts are incomplete until you have "dabbled" in this discount pond!

 

6. Make the discount terms crystal clear

The terms of the discount have to be transparent to have the maximum effect on sales.  Some customers may perceive free delivery to be better value than an equivalent cash discount - and some might think the opposite. It’s not just about cutting the price, it's also about perception.

It’s always a good idea to keep the discount on view right through the purchase journey from product selection to checkout. At no point do you want your customer to be confused about whether they are viewing the original or the discounted price.  What you don't want is any doubt, leading to abandoned purchases.

If your customer is expecting a discount and it isn’t apparent that they have been awarded it, they will question the amounts they’ve paid.  This is a lose-lose situation for you because a customer questioning your prices is not a happy bunny, and your time will now be spent investigating the order and placating the customer rather than fulfilling their order.

 

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7. Abandoned basket incentives

Results using abandoned basket emails can be very positive. If you additionally offer a discount, you can relay to those customers that you really want their business and potentially negate any price comparisons they may have actioned since viewing the item on your site.

Every digital shopping basket that’s filled but not taken to checkout should be viewed as a missed opportunity for retailers. To encourage shoppers into making a purchase, some sites regularly follow up abandoned baskets with reminders, offers to help if you had “trouble checking out,” and sometimes offering discounts and other incentives.

Online retailers use the e-mail follow up as a strategy to boost sales among consumers who are undecided. However, understanding that retailers use the abandoned basket discount as a strategy, some consumers are in turn abandoning their shopping baskets as a strategy of their own, a strategy to provoke the site into offering a discount that wouldn’t otherwise appear.

If your company really wants to make the sale you might just need to come up with a better offer this "second time around"  – a discount and/or free delivery perhaps?

 

8. Measure what works

To be successful with your discounting strategies for ecommerce you have to both understand and be able to measure what works.  Setting goals and measuring real-time data will tell you whether your discounts are driving the customer behaviour you intended.

Similarly, A/B testing can quickly tell you which type of discount and which methods of presentation are most effective.

If your discounting strategies are not actually increasing sales, all you are doing is throwing away profit. If that’s the case you need to recognise it early on and try something else as quickly as possible! One-size doesn’t fit all with discounting strategies and you should test and learn to maximise profitability and revenue.

You absolutely can and must test your whole pricing strategy alongside discounts and promotions to hit the sweet spot between generating sales and profitability, whilst at the same time protecting your brand and product image.

 

Discounting Strategies for your Ecommerce Company

When it comes to your eCommerce marketing and pricing strategy, discounts are undoubtedly an important element of the mix. Remember, it's how you use them that determines their value – and the benefit they bring to your bottom line.

Discounting strategies for your ecommerce company should be strategically implemented and the performance of your discounts should be analysed regularly.

 

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Sources 

The BlackCurve Ecommerce Pricing Guide

The Definitive Guide to eCommerce Discounting by Aran Reeks 2014

https://econsultancy.com/blog/64782-how-to-use-discounting-without-harming-your-business

https://easydigitaldownloads.com/blog/effective-ecommerce-marketing-discounts/

http://business.time.com/2012/09/27/the-passive-aggressive-way-to-haggle-online-abandon-your-shopping-cart/

http://www.amanet.org/training/articles/should-you-offer-a-discount.aspx

http://blog.hubspot.com/insiders/should-i-discount-my-product

https://www.thebalance.com/retail-pricing-strategies-2890279

http://smallbusinessesdoitbetter.com/2013/02/5-reasons-why-you-should-offer-discounts/

http://www.forbes.com/sites/geoffreymorrison/2014/07/20/cheap-and-good-deal-are-not-the-same-thing/#498e46834a6a

http://money.usnews.com/money/the-frugal-shopper/2014/02/20/5-things-you-should-know-about-groupon

The Strategy and Tactics of Pricing, Tom Nagle and John Hogan 2016

Pricing with Confidence:10 ways to stop leaving money on the table, Reed K. Holden and Mark Burton 2014

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