01 Jun 2021 By By Alice Davies
Offering discounts and incentives isn’t anything new, but, if done well, it’s a great way of keeping customers coming back for more, as well as gaining new ones.
An eCommerce discount strategy needs to be well thought out and planned meticulously, however. Too many offers and incentives will ensure customers only buy from you when they can apply a discount, thus changing their perception of your brand, which can have a much bigger impact in the long-run.
Within this article, we’ll outline exactly what an eCommerce discount strategy is, how it works, the benefits of implementing it, and some of the top strategies you should consider.
Creating a discount pricing strategy for your eCommerce business is a great way to maintain customer loyalty and increase sales. But what exactly is it?
From discount codes to automatic discounts, a discount pricing strategy can often help you meet sales objectives, sell stock in bulk, and drive brand awareness. You’ll already have a pricing strategy in place for your eCommerce business, looking into distribution costs, positioning, and meeting demand. A discount strategy can help you sell these products faster and in greater volumes.
However, you need to be smart when it comes to creating a robust discount strategy, as too many discounts and offers, can change your customers’ perception of your company. You should have a clear understanding of why you’re implementing a discount strategy (brand awareness, customer loyalty, increasing sales, launching a new product etc.) and then an outline of how you’re going to do this. You can see how to do this further in this article.
It’s human nature to want to get a good deal, or at least feel like we’re getting a good deal. When we’re offered some kind of discount, we’re being influenced into making the purchase right then and there, instead of going away and thinking about it.
So how does the psychology of discount pricing work?
Abandoned basket offers or limited time offers don’t stay around forever and customers feel a sense of urgency that if they don’t buy now, they might not find a deal this brilliant again. That fear of missing out is more likely to prompt a customer to make a decision right then and there, instead of pondering their choice and leaving it until the next day - and running the risk that the discount has disappeared and so has their intent to buy. This tactic also increases the amount of products a customer may buy - even if they didn’t set out to purchase them. The price or discount is perceived as too good to miss.
Exclusive deals, such as birthday email discount codes, or promo codes for members only, make customers feel special and gives them a valid reason as to why they’re getting a great discount. Exclusivity is important when it comes to discount strategies, as customers like to know why they’re getting something for nothing - and too many discounts or constant offers will make customers believe your prices are too high anyway, making them less likely to want to purchase.
Showing customers the original price of a product, before the discount is applied, changes the perception of that product to the customer. We’re getting a higher value item for a discounted rate and boy, do we feel good about it. Some companies use a different tact altogether, inflating the original price of the product and placing an even bigger discount on it. Customers are savvy though and can catch on to this tactic quite easily if the same product is showing up at a lower price on every other website. Black Friday is a clear example of this; it’s all about huge discounts and deals, some of which can only be achieved by creating artificial pricing to begin with.
There’s no doubt that discount codes, offers, and incentives work when it comes to increasing sales and gaining customer loyalty. But there are a few negatives, especially when not executed correctly. We’ve gone through the benefits of eCommerce discount strategies, as well as outlined a few things to be aware of.
Making customers feel important and valued is crucial to maintaining loyalty. Although discounts and incentives aren’t the only way to do this, they are a large part of it. Customer loyalty arises from those individuals who would buy from you regardless of whether you have a discount or not. Providing them with a birthday discount or exclusive member code throughout the year is likely to increase how often they buy from you and maintain loyalty because they feel like they’ve been rewarded.
Your loyal customers aren’t the only ones your discount pricing strategy can attract. This doesn’t have to mean huge discounts, but could be free shipping or 10% off for new customers if they sign up to your newsletter. It could even be a referral code for their friends and family. Not only does this provide the customer with an incentive, they can then pass on this incentive to new customers, who are more likely to trust the shopping experience of someone they know. This could be sent as an email or included as a physical voucher in their purchase.
Customers, whether new or regular, are far more likely to convert if they are offered some kind of discount. They’re also more likely to buy unanticipated items, especially if the discount applies to the whole store. This means you’re gaining sales you might not have received without the discount.
Got stock you need to shift? Promotional offers can be a great way to achieve this, as well as allowing you to cross-sell too. This allows you to minimise losses of inventory you haven’t been able to sell and gain warehouse space back for products that are more likely to sell or are in higher demand.
Of course, with any kind of discount or offer, your profit margin will suffer. However, depending on the kind of discount you’re providing, this may lead to customers purchasing more than anticipated, which can help alleviate that loss. Your strategy should also be to retain these customers after the discount has ended, so they’re likely to purchase from you, even when you don’t have anything on offer.
Your discount pricing strategy needs to be targeted to reduce your risk of attracting flash-in-the-pan customers i.e. individuals who find the best offer or voucher code available, use it, and never return. Think about the type of discount you’re implementing and who that will attract, as well as the time of year that the promotion will be running.
As mentioned above, customers can perceive an offer in a certain way, especially if that offer has been running for a long time or the price of the item seems massively inflated. This not only decreases the value of that product on your site, but also decreases the overall value of your company, reducing customer retention and potentially loss of trust in your brand. This is why discount strategies need to be carefully thought out.
If you have an influencer marketing strategy, you may provide influencers with discount codes that they can provide to their followers. This is known as affiliate marketing and is a great way to gain new customers, as they’re likely to trust a recommendation from someone they follow.
If a shipment is tagged as an influencer shipment, Shipster can automatically include the relevant additional documentation e.g. campaign info for the influencer.
Earlier in this article, we talked about the importance of having an efficient discount pricing strategy, one that targets your specific audiences. Creating coupons for product categories is a great way to do this.
For instance, if your customer has already purchased from your baby clothing range, it’s likely that they’ll need to purchase from this section again. Including a coupon for this category within their purchase will make them feel unique and appreciate the offer more. Simply including a 10% discount off your entire site might not capture their attention as much as 20% off a specific category.
Shipster can automatically prompt staff to include the relevant voucher if an order contains an item from a relevant category. This automatic process makes it simple to offer incentives to customers, without any complications.
Students are often cash-poor, but they still need clothing or equipment. Many companies offer some kind of student discount, especially if this is your target audience. This can encourage students to use your company above your competitors, as well as keeping those students as customers long after they finish college or university.
You probably already have a number of key seasonal dates outlined in your overall eCommerce strategy, such as Christmas, Black Friday, Mother’s Day, summer holidays, halloween etc. Including offers around these seasonal periods will keep your business competitive and provide your loyal customers with
With Shipster, you can automate an on-screen prompt instructing warehouse staff to include seasonal vouchers within purchases between your set dates.
We’ve all received a pop up, or even an email (if we got far enough in the buying process to submit our data), when we’re about to exit an eCommerce store, telling us that there are items in our basket we’ve ‘forgotten’ to buy. Of course, most of us haven’t forgotten, but may be put off by high shipping costs or even just changed our minds.
An abandoned basket / cart or exit incentive is likely to increase the chance that a customer will make the purchase. This could be an email with an exclusive discount, like 15% off, or a pop-up that triggers free shipping.
New customers are extremely important, as they have the potential to turn into loyal, retained customers. But there’s a certain expectation that to do this, you need to provide a discount code.
This doesn’t need to be huge, however. As mentioned earlier, it could be a great way to capture consumer data, such as email addresses. You can then provide them with an initial discount for receiving their data, and then are able to market to them after this, showing exclusive offers to them and products that match their needs.
We all like to look like we’re helping our friends and family members out - referring to a friend is a great way to do this. Not only can your customer gain something back, such as an exclusive discount, the friends they’re referring can also get a voucher code or incentive. This increases sales, increases customer loyalty, and creates a referral scheme that can pass on from one person to another.
Email subscription discounts are a great way to gain new customers and increase your marketing database. You could even go one step further and create an exclusive member club (similar to the likes of H&M), where customers sign up and then gain access to member pricing. This increases customer loyalty and retention. They’re more likely to buy from your company because they know they’re being rewarded, whereas they might not get these rewards if they went elsewhere.
Struggling to sell a specific product? Or perhaps you’ve recently launched a new product? Add a discount to increase the incentive to buy. If you’re looking to sell on product inventory, then this can be a great way to cut your losses and make extra space for new products; and if you’re promoting a new product, a discount can be a great way to increase customer retention.
Earning rewards is a great way to retain customers. You can achieve this by creating an exclusive member zone, where customers can build up rewards and points each time they purchase.
Having an eCommerce discount strategy is effective, especially when planned out well and implemented correctly. But you need to tread carefully and tailor your goals to your audiences’ needs and wants, instead of discounting categories and products on a whim.
It’s a sure-fire way to increase customer retention and drive sales.
Copyright © 2020 Shipster Solutions. All rights reserved.