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To discount or not to discount - that is the question

By
Dan Bond
December 19, 2023
5 mins

When it comes to retail, offering discounts is often a double-edged sword. On the one hand, discounts can draw in new customers and significantly boost short-term sales.

But also, they can risk devaluing your brand and cutting your profit margins. The decision to discount or not is critical and can carry benefits and drawbacks.

Key factors to consider

Impact Factor

There are only a limited number of levers retailers can pull to impact their eCommerce performance. Price is a crucial factor - and offering discounts can drive higher conversions. Without a vital pull factor like a discount, expect changes in results to be lower.

Profit Margins

Retailers must evaluate whether they can maintain a reasonable profit margin after discounting. Heavy discounts may attract customers but deplete profits if not managed effectively.

Brand Image

Continuous heavy discounts may affect brand image, making it appear less premium or exclusive. This could potentially alienate customers who value these aspects, especially over time.

Customer Expectations

Constant discounts can also train customers to wait for sales or work out how to trigger discounts (there are online forums focused on that), negatively affecting sales in non-discount periods.

Inventory Management

Discounting is an effective way to clear old or excess stock, allowing for new inventory. With changing trends, it's important to keep products fresh and not clog up stores and warehouses with products that won't sell.

Competitive Landscape

Retailers should keep an eye on the pricing strategies of their competitors. If other businesses are discounting heavily or are pricing more aggressively, it might be necessary to offer similar discounts to stay competitive.

Market Conditions

Economic factors, such as periods of recession, may necessitate offering discounts to stimulate sales. Also, during economically challenging periods, offering better value is a great way to show customers you're focused on their needs.

Using discounts intelligently

Understanding the context, especially around customer intent, empowers retailers to serve offers intelligently and timely. The key lies in looking at the consumer's journey and where they are in the funnel, predicting their behavior, and looking to nudge them to the desired outcome.

By leveraging data analytics, retailers can discern patterns in consumer behavior, preferences, and purchasing history. It's not just about seasonality but also about understanding individual customer habits and broader market dynamics and responding with the proper intervention.

Setting up discount, unique, or non-discount code offers in the platform

Single discount codes

A single discount code would be where you use one code for every visitor. For example, BLACKFRIDAY10 could give every person with the code 10% extra off on Black Friday.

This kind of offer code is easier to manage, but there are drawbacks, too. You can't control who gets to use the code - the code might get shared even if you limit who can see the offer. You can specify the number of times it's used, but then the people you were targeting might miss out.

Setting up a single discount code is straightforward - choose the Discount code offer and enter the code you've set in the offer configuration.

Unique discount codes

Unique discount codes solve the offer limiting issues with a specific number of codes that can only be used once. This means you can restrict who gets the discount and how often it can be used.

There is no general code that risks becoming generally available. The trade-off is that there is more management in setting up and tracking the codes.

Unique discount codes can be manually added or uploaded as a CSV file to the platform.

Non-discount offers

If you're not going to give discounts, the other option is to use offers to direct visitors to products and categories or content, highlight benefits, or give reasons to buy.

For this, you need a Weblink offer.

Discount code offer examples

Discounts should be used when they will make a difference to your eCommerce performance - looking for critical moments when they can drive impact.

Ctrl+C

When a visitor finds a product they're interested in, it's not always the case that they will purchase it. One typical behavior is to copy the product's name and then paste it into Google or Amazon to find a better price.

Even if they don't find a better price, the break in the experience means they might not get to checkout.

Instead of losing the potential sale, trigger a pop-up with a discount to reduce the chance of abandonment.

Exit from paid search

Exit campaigns trigger when visitors look like they will leave the site without converting. To add more relevance to the offer, you can target by acquisition channel - this also helps ensure the channel performs as well as possible.

Invalid code

Having the discount code box at checkout is a double-edged sword. It can help to drive conversions, but it can also send visitors off looking for codes in search. They can end up on third-party sites with old or made-up codes that don't work - breaking the experience and preventing conversions.

Instead, trigger a valid discount code when an invalid one is used and reduce abandonment at this stage.

Non-discount offer examples

If you're not offering discounts, the impact on performance will likely be less significant. You're looking to improve the customer experience and gentler nudges to remind people about key benefits and reasons to buy.

Delivery cut-off

Driving urgency and FOMO is a great way to get more sales. An offer highlighting that if someone orders by a specific time, they get delivery faster can be very effective.

Product recommendations

If you have a big store with many products, visitors can be affected by too many choices. If they can't find something they want quickly, they may leave and try a different site instead. By recommending products based on the visitor's behavior, you can reduce the chances of this happening.

Product recommendations are highly configurable so you can apply context to each offer.

Cross-sell

Similar to product recommendations, but more directly linked to the items in a visitor's cart or basket. For example, if they're buying a TV, how about a sound bar to go with it?

eCommerce Funnel Optimization Guide