Term

Discounts

noun

Discounts refer to the tactic of dropping the prices of your goods or services to increase sales.

What Is a Discounts Strategy?

A discounts strategy refers to the tactic of dropping the prices of your goods or services to increase sales. However, offering too many discounts too frequently can affect your bottom line. Consumers may think you’re offering low-quality items or are desperate to increase sales. That’s why it’s important to understand the nature of a discounts strategy and how to implement it for your business best.

What Are the Common Types of Discounts Pricing?

Discounts fall into one of the seven basic categories. These categories help you understand which discounts are best suited to your business.

Seasonal Discounts

At the start of every season, you can jumpstart your sales by offering a discount. Offering discounts at a specific time of the year not only generates hype but also helps you clear last season’s inventory so you can prepare for the coming season.

Volume Discounts

Volume discounts convince customers to buy in bulk with a lucrative offer. The more items a customer buys, the less it costs them. You could also approach volume discounts by bundle offers where customers get some items for free for buying the bundle.

Promotional Discounts

These discounts are short-termed and focus on getting a special sale. You don’t want to use promotional discounts recklessly because frequent promotions of this sort can make customers wait it out until you announce another promotion. Customers love holiday season sales, and that is what you should offer. But do not make promotions a part of your sales strategy.

BOGO Sales

Buy one get one (BOGO) often implies that the purchase of the second item is free. If you need to buy something to get another item free, you are getting a 50% discount, not a free item. Make sure you spell out the nature of the BOGO clearly and announce the real savings for your customers.

Loyalty Discounts

Membership Discounts

These discounts can be reserved for membership holders of your special club (for example, Amazon Prime members) or members of a respected organization like the military, veterans, etc. Just like loyalty discounts, showing some love to customers is always a good idea.

The Psychology Behind Discounts

You would think that discounts are a byproduct of online shopping the way competition has spiked in the market. Today, many brands are offering discounts to customers for instant gratification and sales.

However, the strategy has been around for a long time. The first company to launch a discount was Coca-Cola in 1987; customers could get a free glass of coke in exchange for a discount voucher. This marked the beginning of discounts as a pricing strategy leveraged by companies to encourage customers to purchase.

Discounts have evolved since then, with new types of discounts making up the pricing strategy of global businesses. Psychological principles are now at work to convince the customers to buy the product. Discounts also have their own psychological touchpoints, which include:

Classical conditioning: Offering many discounts can train your customers to wait for discounts to start shopping.

Quality perception: One of the main reasons customers buy a luxury product is to get better quality for the price or at least a perception of quality. A product priced at $300 will seem cheaper than the same product priced at $499. So discounting can lower the perception of your goods or services.

Scarcity: discounts coupled with urgency are more effective. When the customer sees the ‘buy now or pay full price later’ opportunity, they have to strike at the moment. The decision is mostly swayed at paying immediately.

Influence: so many people love to brag about getting a good deal from a store. People who get a good discount will feel smarter and mention it to friends and family.

Perception of savings: comparisons can make your offer look more legit. Do not just mention a discount; mention the original price and then put a slash on it. This way, you make it look more dramatic!

Exclusivity: make sure that you justify your discounts and always have a reason for the discounts. Be it the end of the season or your cat’s birthday, announce why you are discounting. Otherwise, your customers will think that your profit margins are very high.

Top-Performing Discounts Strategies You Can Apply Today

Look around, and you will see so many new discount pricing strategies in play. Customers expect a discount or get some money off Black Friday if they shop from you for the first time. Here are some discounts strategies that work in ecommerce:

Discount codes: Discount codes are money-off vouchers for the digital shopper. So many aggregators list discount vouchers for every store and reveal codes to customers. This means that finding a code is so easy for today’s ecommerce customers. You can offer a discount code for reasons like a customer’s birthday, an event, for an influencer to share with their audience, and promote a product line.

Cart abandonment discount: Every online store gets visitors who leave without completing their purchase. Abandoned cart discounts incentivize those customers to come back and buy.

Flash sale: Shopping events like Cyber Monday are full of flash sales. Flash sales mean customers can get discounts on many products in a short period. Flash sales also tap into the urgency factor and compel customers to hit that buy button.

Gift with purchase: Getting a gift is not a discount, but it sweetens the deal. This tactic works best on first-time customers who’ll appreciate being welcomed at your store.

Tiered discounts: The more money the customer spends will be a marker of how much money they can save. This is the strategy behind tiered discounts, where the discount percentage will increase with the total cart amount.