How (and Why) Discounts Work

Discounts and coupon codes get a bad name, with naysayers claiming they hurt your brand, undermine the value of your products, and end up costing you money. When used correctly, discounts can be a valuable tool in your marketing arsenal.

“Crafty customers know when and where to find a good deal, and brands that issue special offers create win-win scenarios for shoppers who save money and retailers who grow their sales,” says Danny Wong of Conversio.

Not only do customers love discounts, when you create them with your business needs in mind, each one you release will be more and more effective. Consider these discount ideas to see how you can use them to drive sales, increase loyalty, and find new customers.

Four Discount Options for Different Business Needs

Time-sensitive discounts use urgency to engage buyers who might be on the fence. The psychology behind the idea is based on the pleasure principle, which says that we’ll avoid pain to feel pleasure. In this case, the pain would be missing the deal and paying full price later. The pleasure, of course, is knowing you got a great deal.

This is a good discount to use when you have surplus stock or seasonal items that need to go. To promote the discount, turn to all your marketing channels, including your shop and any other website or blog you might have. Because it’s not exclusive, you want to reach everyone who might be interested.

Schedule an email campaign to run during the sale - it’s usually safe to send one email for the launch of the sale and one shortly before it’s over, unless your subscribers expect to hear from you more or less frequently. Also post on social media often and include details in your shop - in a header image or description, or even on the individual product pages - for anyone who shows up organically.

Subscriber-only discounts are specific to your subscribers - the people you email regularly. You have a newsletter, right?

This kind of discount is a great way to maintain loyalty with subscribers. Or, maybe even better, to add to your subscriber base: “If you want to build your email list because you want to share and sell your product, providing a discount code for opting in can be a great way to build your list and grow your bottom line,” according to Kristen Runvik. This is a simple way of convincing people to sign up - and as your email list grows, you can continue nurturing subscribers with emails featuring your work, future sales, and other goodies.

Since this is targeted to your subscribers, make it feel like an exclusive club by giving members a discount before everyone else, or, better yet, a discount no one else gets. In your email, don’t forget to use language that reinforces the exclusivity of this discount so they see the value beyond the numbers.

A site-wide discount on all products or discounts on specific categories are strategies most retailers use at one point or another. You’ve likely seen it many times: “25 percent off everything in the store” or “take an extra 10 percent off apparel at checkout!”

The general nature of this discount makes it a reliable way to boost revenue for all types of businesses. In a 2016 poll, 47 percent of respondents said site-wide discounts are the best for maximizing sales. As a new retailer, this could be a great way to drive your first season of selling - but don’t overdo it. Offering too many discounts can devalue your products. When dealing with new customers, you want them to see that what you’re offering is worth what you’re charging.

Use this during slow times of the year as a way to drive additional sales, shortly after launch when trying to get your products in as many hands as possible, or during your busiest time of year to hit a new sales record. Many sellers use this during the holiday season when people are already shopping.

Try making this discount time-sensitive - maybe over a long weekend or in the run up to the holidays - to increase the appeal while boosting total sales.

As a side note: It can be hard to drive sales when your brand is new. A discount like this encourages people to take the first step and buy a product from you. When they see the quality of what you offer and experience great customer service and an easy-to-use checkout process, they’re on the road to becoming a loyal customer. And once they purchase, if they join your newsletter, you can continue marketing to them with personalized emails and special perks for being an early supporter.

Free shipping is straightforward, easy to understand, and effective. How many times have you added more to your cart to get the free shipping deal? Shoppers love that just as much as sellers do, according to a 2016 Walker Sands study. Nine out of 10 people indicated free shipping as the number one incentive to shop more. Free shipping drives sales and customer loyalty.

Because this discount is a favorite among consumers, you can benefit big by offering free shipping on orders over a certain dollar amount. It’s probably best to offer this for a limited amount of time or for those high dollar orders to ensure you’re not losing money on the deal. Shipping can be expensive, so the cost to you may outweigh the value of any sales from the discount. If this is the case, you could offer a slight twist: free pickup for local customers. Get face time with your supporters and limit any costs to you - sounds like a win-win!

Use Discounts Wisely

Use these tips to be intentional about the discounts you offer and when you offer them. When you pair them with a business need, you can set concrete goals to track your efforts and successes. When it’s done well, you’re driving sales, maximizing revenue, and building a loyal customer base. Just be sure that you’re not overdoing it and losing money or devaluing your products. There’s a balance, and only you can find it for your business.