How to Create an Ecommerce Discount Strategy

There’s nothing like a discount to attract shoppers who might be on the fence about making a purchase. Discount pricing describes all the strategies involved with applying discounts using coupons, digital codes, bundled prices, or retail sales. The right ecommerce discount strategy can reduce abandoned shopping carts and improve conversion rates – here’s how it works.

Why should you have a discount strategy in ecommerce?

Discounts can eat into your bottom line by reducing profit per sale. However, there are many reasons to consider applying a discount strategy in ecommerce. To begin with, customers love a good deal – and it makes them feel good. A 2012 study commissioned by Coupons.com in collaboration with Claremont Graduate University looked at the impact of coupons on health and wellbeing. It found that discount pricing caused a rise in oxytocin levels and reported feelings of happiness. Participants also reported decreased stress levels at the same time. When you provide customers with a discount, they associate these feelings with your brand.

It’s best to walk a fine line between the cost of goods sold, supply and demand, and competitor pricing. When applied correctly, a good ecommerce discount strategy will lead the consumer to assign greater perceived value to your products. Time-limited discounts inspire the fear of missing out on a good deal, increasing conversion rates.

Types of discount strategies

There are numerous methods you can use to apply discounts. One of the first factors to consider is whether to use discount codes, or automatic sitewide reductions. There are pros and cons to both strategies. Discount codes let you target customers through email marketing and give the feeling of exclusivity. They offer incentive to make a first-time purchase and try out your products. Yet at the same time they rely on your customer to manually enter the code, and checkout optimization is all about reducing these unnecessary steps.

Here are a few additional types of discount strategies to try:

• First-time customer discounts – attract new customers with a special discount

• Loyalty-based customer discounts – keep existing customers by rewarding them with a coupon or gift

• Free gift with purchase – let the customer choose or add a complimentary promotional product

• Buy one, get one free (BOGO) – the customer receives an additional item with each spend

• Holiday discounts – maximise increased traffic during high-volume shopping seasons such as Black Friday and Christmas

• Pre-order discounts – hype up a new product with a reduced price for pre-ordering before it hits the market

• Tiered pricing strategy – the customer receives a higher percentage off with the more they spend

Elements of a good discount strategy in ecommerce

The examples above give you some idea of how to implement discounts into your overall ecommerce strategy. Think about elements such as:

• Type of discount

• Duration of discount

• Time of year

• Items to discount

• Percentage vs flat rate discount

Don’t underestimate the issue of shopping cart abandonment, working this into your ecommerce discount strategy. Australians are more likely to abandon their carts than shoppers in North America and Europe. According to the SAP Consumer Propensity Study, 57% of Australian shoppers abandoned their carts either sometimes or all the time. A whopping 67% of respondents reported abandoning their cart all the time when shopping for clothing online. That’s over two-thirds of your site visitors, so how can you combat this issue? Try turning it around by offering a discount when the customer’s about to leave your ecommerce store. This could be an instant discount code or a perk like free shipping.

What is the best ecommerce discount strategy?

There’s no singular strategy that’s best for every business. The right ecommerce discount strategy will depend on the type of product you sell, customer preferences, and plans for growth. If you’re just starting out, you might focus on acquiring new customers with first-time purchase discounts. If you’re trying to boost customer lifetime value, you should focus on loyalty and rewards programs. The process often involves trial and error to find the best fit, evolving along with your customers.

Be sure to combine your discount strategy with a smooth payments process. GoCardless gives you an efficient, secure way to take one-off and recurring payments using direct debit. It’s simple for small businesses to get started, and you retain control over the timing and amount of payments to reflect any applicable discounts. The result is an increase in conversion rates.

We can help

GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.