How to Use Discounts, Coupons, and Offers Effectively in eCommerce
Everyone loves a bargain. But is discounting always in the best interests of your business?
A discount strategy that’s not carefully considered can seriously damage your brand, for three main reasons:
- focusing on short-term increases in sales may eat into your profit margins
- continual discounts can lead to customers undervaluing your products
- frequent discounting can create ‘discount chasers’ (customers who never buy at full price)
It’s essential to be aware of these discounting pitfalls — but this doesn’t mean your brand can’t benefit from offering discounts.
Strategic use of discounts, coupons, and offers can boost new sales and drive customer loyalty. The key to success is understanding how to offer discounts in the right way.
In this blog post, we explore ten ways to use discounts and how to make discounts more successful. We also discuss discounting dangers that are best avoided.
Read on to learn how to offer discounts well and increase your revenue.
10 ways to use discounts
The following ten tactics form the basis of a strong and sustainable discount strategy:
1. Boost customer acquisition
Offering first time customers a certain percentage off can be an effective approach to customer acquisition.
Communicate this offer using an unobtrusive subscription pop-up to capture a visitor’s email. This is helps push people towards a purchase while growing your marketing list.
2. Reward loyalty
Make sure it isn’t just new customers who benefit from discounts. Your most loyal customers deserve a treat every now and then.
Use occasional discounts to reward loyalty and increase customer retention.
3. Incentivise referrals
Grow your customer base by incentivising referrals. Offering a small discount for customers that invite friends to purchase is a powerful way to do this.
4. Create delight
Surprise and delight your customers by offering them a discount as a birthday treat. This helps customers see a discount as a gift rather an everyday occurrence.
5. Recover cart abandoners
Including a discount in your cart abandonment emails from time to time. This helps sweeten the deal and entice customers back to buy.
Just make sure you don’t do it every time. Switched on customers may spot this and abandon their cart to get a cheeky discount.
6. Increase average order values
Pumping up average order value is a great way to grow your revenue. One way to do this is to offer a discount (or free shipping) to customers who place an order above a certain threshold.
This tactic overcomes the negative impact other forms of discounting may have on your profit margin.
7. Promote user generated content
User generated content (UGC) is an innovative way to build loyalty and make use of social proof to grow your audience.
But how do you encourage customers to get involved? Strategic use of discounting is one option.
Offer customer a discount for sharing on social or adding their photos to your website to enjoy the benefits of UGC.
8. Gain reviews
Increase the number reviews you have by offering customers a discount when they leave one.
This allows you to benefit from the power of social proof and is an important way to gain feedback.
9. Shift stock quickly
Offering a discount on items you need to shift quickly is a handy way to get stock moving. Alternatively, add an extra discount to items already in the sale.
These tactics should only be used on occasion. Done too often, heavy discounts can lead to customers to undervaluing your products.
10. Boost sales across the year
Discount codes and coupons can be used to help boost Black Friday and other seasonal sales. They can also be used (sparingly) to boost sales during quieter periods of the year.
How to make discounts more successful
Now you know ten ways to use discounts. But how do you make discounts more successful when you offer them? Here are our top tips:
Personal vs universal
To discount successfully it is important to be able to judge whether a personal or universal discount code is most appropriate.
Universal discounts can be redeemed by anyone and will get shared online. This can result in a flurry of customers redeeming the discount.
You may decide to use universal discounts if your aim is attracting new customers and increasing the reach of your brand.
If you want to keep a tighter control on the discounts your offer, personal discount codes or coupons are a better option. They are also a nice way to make each customer feel special.
Set a deadline
Setting a deadline by which the coupon or code must be used creates a sense of urgency. This is a smart way to prompt customers to take action and buy now.
Send a reminder
Sending out a deadline reminder saves those who have left redeeming to the last minute from missing out.
Make it redeemable in-store
To maximise sales, make sure your discounts are redeemable in-store as well as online.
As with any marketing activity, measuring the success of your discount strategy is key.
Monitor what drives conversions and the impact discounts are having on your margins. This allows you to refine your approach and improve results.
The dangers of discounting
To succeed at discounting, moderation is key. Offering too many discounts may damage your brand.
Here are the dangers of discounting to avoid when creating your strategy:
Giving too many discounts to frequent purchasers is unwise. You risk cannibalising a consistent revenue stream.
Those who happily buy from you on a regular basis don’t need discounts to get them over the line. Focus on discounts for those who may not otherwise convert.
Creating discount chasers
Be careful not to create too many patterns in the way you discount.
If you consistently discount in certain circumstances, you may train customers to wait for offers. This creates ‘discount chasers’ who will avoid paying full price.
Undervaluing your products
If your brand constantly has a sale on this may negatively impact how consumers perceive your brand.
Some stores on the high street seem to be in a perpetual state of closing down. This causes consumers to undervalue their products.
Products become seen as cheap and disposable, rather than desirable purchases to be proud of.
Decreasing your margins
Discounts may get sales over the line, but at the cost of reducing your profit margins.
It is important to work out how much profit margin flexibility you have, before you steam ahead with discounting.
When it comes to discounts, never underestimate the power of online sharing.
Don’t expect universal codes to stay in the hands of the original recipient or on the channel you first shared them on. They will get shared online. Everywhere.
Make sure you stick to personal codes if you aren’t prepared for the consequences of this.
Having an overview of the disadvantages of discounting is crucial when creating a discount strategy.
The notable drawbacks are profit cannibalisation, reputational damage, and creating discount chasers.
That said, when they are used well, discounts are a useful way to increase sales and build loyalty.
There are numerous discounting tactics, each of which have different marketing benefits. To use these effectively, it is important to understand they fit with your wider marketing strategy.