How to use discounts effectively

Ecommerce store owners can incorporate discounts into their strategies. However, it's important to know when to use them most effectively. Online discounts offer numerous benefits. For instance, they are easy to track in email messages and help increase customer acquisition and drive customer loyalty. On the other hand, discounting too frequently reduces profitability and often attracts only price-driven shoppers. When customers come to expect a discounted price, it will be hard to convince them to pay the full price again. Discounts be a successful way to drive business when done correctly.

How to use discounts effectively

A strategy for implementing discounts will depend on the type of store being run. Ecommerce stores with larger margins can use discount offers to increase sales and meet revenue goals. Smaller businesses should avoid using discounts as a customer acquisition strategy because they have less of a profit margin to work with. Instead, ecommerce store owners should use discount coupons for customer retention.

Here are some times when it may be effective to use discounts as part of an ecommerce strategy:

To reward loyalty: When customers have shopped in a specific ecommerce store previously, it can be prudent to reach out with a discount offer. Providing discounts to loyal customers is a way of saying thanks and maintaining their business. It costs up to 10 times more to acquire a new customer than sell to an existing one (1).

Reaching out to Influencers: It's a good idea to include a discount when getting in touch with influencers, like industry bloggers. A discounted product gives these individuals an incentive to try it out and potentially promote it. The exposure is well worth the reduced revenue.

Abandoned cart emails: In this case, sending a discount coupon can encourage shoppers to convert after they have left items in their cart.

Referrals: Offering a discount when a current customer refers a new shopper is worthwhile because the business could be introduced to a new revenue stream.

Use a different pricing strategy:
Rather than relying on discounts, store owners may also choose to use an adaptive pricing model (2). Under this strategy, store owners may have several different versions of a product and sell them at different price points to appeal to different customers.

Using discounts thoughtlessly can result in decreasing returns and difficulty gaining long term customers. Before offering discounted merchandise, ecommerce store owners should formulate a strategy or determine whether it is necessary to use them at all.

1. Can You Buy Loyalty? The Downside of Discounts

2. Ditch the Discounts