Offering Discounts To Customers: Does It Really Work?

Offering discounts to customers didn’t become a mainstream tactic amongst merchandisers until the late 60s and early 70s when store chains such as Walmart introduced the concept to the masses.

The theory was that steep discounts on some items drive sales throughout the store. And boy, does it work! Walmart is currently the largest retail chain in the world ($485.87 billion in annual sales in 2017).

In the new world of online retailing, it’s even more popular. People can instantly search or sign up and receive a discount coupon and use it immediately. It’s instant gratification without leaving your chair.

At some point, as a store owner, you’ll consider offering customers discounts. If you do, you’ll join the thousands of other retailers using the strategy to get customers on the hook.

But does it work in this day and age?

The theory goes that you offer a discount on a product or group of products, and the customers will come rushing into your store because of it, hopefully buying other things as they go that have a better markup.

For the most part, it works a treat and has allowed big companies like Walmart and Amazon to grow as they have.

But as a small retailer, you risk negative consequences if you do it too much.

If you want to use coupon discounts in your store, you should follow a few simple rules. When done right, discounting can result in amazing returns.

Pros Of Offering Discounts To Customers

There are a lot of great positive reasons for giving discounts to customers:

  • Quick and easy to construct an offer
  • Great for generating demand and increasing the volume
  • It can be used to motivate audiences to take action
  • Increased conversion rate
  • Helps you meet sales goals

If you haven’t offered discounts to customers yet in your store, it’s worth a shot. There is a lot to be gained by doing so.

Cons Of Offering Discounts To Customers

While it’s easy to see that discounts can do amazing things for your business if you do it wrong, you can:

  • Suffer decreased margins long-term
  • Train customers to wait for specials if you use the tactic too often
  • Make customers price driven

The last thing you want to do is compete with yourself in a race to the bottom.

In my business’s selling software, I have found that after traditional holiday discounting days like Black Friday and Cyber Monday, where consumers are looking for a deal, we have a sharp drop in the following months where there are no deals. It seems like people hold out, waiting for their opportunity to pick up a bargain, and we have to work twice as hard in the following period to make up for it.

discounts
Coupons can do wonderful things for your revenue (click to zoom)

So does this mean you shouldn’t offer discounts at all?

No, there’s great merit to the discounting strategy, and that’s why we continue to do it each year. We usually see a 4-6x jump in revenue for that sales period which is very nice.

How To Offer Discounts Without The Negative Side-Effects

So how can you offer discounts to customers without the negative side effects?

Contrary to what you might read, offering discounts to customers can be done in the long term. It just has to be done in a way that builds customer loyalty simultaneously.

It’s easy to fall into the cycle of constant discounting to keep the revenue coming. But all this does is result in ad blindness, and customers are trained not to buy until there is a special.

That is the worst-case scenario where we don’t want to end up.

Where we do want to end up is using deals and offers to encourage and reward customers for loyalty.

In practice, this can take many forms. Here are three examples:

  1. Deals that reward buying multiples of a product
  2. Offers that unlock a free product when other conditions are satisfied
  3. Deals that unlock free shipping when cart conditions are satisfied

5 Example Deals You Can Run That Reward Customer Loyalty

Here are a set of deals you can copy and use in your online store and the reasoning behind why they work with customers.

If you’re looking for “how” to implement them, our Advanced Coupons plugin for WooCommerce does light work on all of these scenarios.

1. Free Shipping on Orders Over $150 (auto-applied)

This deal applies when a customer shops in your store and buys more than a certain amount.

They have to spend to unlock it, which means they’re working toward a target and are rewarded when they get there. You’ll find that some customers will increase their cart deliberately to get the free shipping discount.

Make sure this coupon is auto-applied, and you won’t have a support headache.

2. Free Sample of New Product X When You Purchase Popular Product Y

Piggyback off the success of one of your existing popular products when introducing a new product on your site. Samples can go a long way to getting customers interested in a product, and you’ll find that this offer makes people want it even more.

Pair it with the next coupon offer, and you’ll experience an amazing uptick in orders for your new product within weeks!

3. 20% Off New Product X On Your Next Order

Being able to customize your offers smartly is the key to massive uptake.

For maximum effect, send this coupon to people who have already shown interest in the product.

Using our plugin Advanced Coupons in your WooCommerce-driven store, you can restrict the coupon to only those customers who have purchased something else in the past.

4. Buy 3, Get Another 1 Free

The classic BOGO (Buy One, Get One) format is a mainstay of retailing. You can use it to increase the turnover of a particular product, meaning they buy 3 of a certain product and get another 1 for free. Or said differently, 4 for the price of 3.

Or you can use it to drive sales of another product, meaning they buy 3 of product X and get 1 of product Y for a discount (or free).

5. 10% Off If You Come Back And Finish Your Order

What’s worse than not getting an order? Not getting it when it could have easily been saved!

That’s what cart abandonment offers are all about. If you can detect when customers abandon their cart, offer them a small percentage off if they return and complete their order within a certain time.

30-Day Challenge: Try Coupon Discounts In Your Store

Here’s a challenge for you.

In the next 30 days, use the above five special discount examples with your customers and see if they make a difference to your profit.

The benefits of coupons are there for the taking if you employ the right strategy and tools. So, see how it goes in your store today.

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