Discount Tactics that will Increase eCommerce Conversion Rates
Discount pricing, done correctly, can help you gain and retain loyal customers in both good and bad times.
But when executed poorly, it can program your customers to only make a purchase when a product is on discount. And that, obviously, diminishes your brand value.
So what is the difference between a discount pricing done correctly and one that is handled incorrectly?
Well, the answer is simple: it’s all in the strategies and tactics you choose to deploy.
This article will unpack all the discounting tactics and show you how to frame in a way that changes or reinforces customer behavior on eCommerce websites. Before we do that, let’s begin by looking at what experienced eCommerce folks think of discount pricing.
Meaningful discount pricing tips from experts
Offering discounts to customers isn’t a new pricing tactic by any stretch. But it’s still as effective as ever. Before you slash down your prices, hear what savvy eCommerce marketers have to say about discount tactics.
Rishi Rawat, Frictionless Commerce Founder, says that discounts can earn you conversions:
Price elasticity states as price go down demand goes up. This is true with discounting too. Discounts lead to better conversions. To a point.
Rahi Jain, an eCommerce Retention Consultant, believes that not every customer should earn discounts:
Discounts should be earned by the customer rather than showered like pamphlets. (At least it should look like an earned unit). Discounts never start the journey, they are mostly used during the end of the funnel, once the customer’s mind is made up.
BigCommerce’s Small Business Content Marketing Specialist, Beatriz Estay, recommends using discounts as a way of improving customer experience:
Promotional strategies don’t only live at the beginning of the customer journey. In fact, offering promotions or discounts at unique moments in the customer journey can strengthen your customer experience and increase conversions.
How eCommerce discount tactics work
Discount tactics are either customer-focused or product-focused. Categorizing tactics under different focuses will help you identify ways that are ideal for your brand.
Failure to be tactical with your offer can be detrimental in two ways.
- They can work against your brand and diminish your brand value.
- The deal you provide can be worth way more than what you stand to receive from the customer, and this will certainly affect your profit margin.
To illustrate this point, let’s take a deep dive in customer-focused and product-focused discount tactics:
Customer-focused discount tactics
Discounts have the power to influence online consumer buying behavior. They can either change or reinforce the existing behavior of a targeted group of customers.
Let’s start by looking at customer-focused discount tactics that influence customers to make a purchase before we look at those tactics that can reinforce customer behavior.
- Abandoned Cart Discounts
According to the Baymard Research Institute, nearly 70% of online shoppers add items to their online shopping cart and leave before completing a purchase. This research concluded that extra costs are the number one reason why shoppers abandon.
Kate Spade New York solves this cart abandonment problem by offering a 15% discount to prospects who didn’t complete a purchase.
This tactic helps them recover business from prospects who have already expressed interest in their products. Cart abandoned discounts have a way of motivating shoppers to complete a purchase, and they can even encourage them to come back again in the future.
- New customers discount
For small businesses with lean profit margins, handing out discounts may not seem like the most logical marketing tactic –but it works. For eCommerce stores, there are many ways to implement discount tactics to convince new customers to buy from your store.
Free shipping, a small complimentary gift, or reducing the order price for every new customer who spends over $50? They are all good ideas that can influence customers’ buying decisions.
Getting a bit more creative, you might also partner with Key Opinion Leaders who have a following that aligns with your targeted audience. You provide their followers with a discount code for your products.
- Referral discounts
This discount tactic is deployed in a way that only targets a select group of existing customers.
It’s not for every customer. Only loyal customers who advocate for your brand by referring their friends and family to your store should benefit from this.
To avoid digging deep into your profits, you should only offer a referral discount if the referred person makes a purchase.
- Subscription Discounts
Giving a discount to people who are willing to engage with your brand, either by subscription or by engagement over social media, is one of the most sure-fire ways to open up a portal to future exchanges. If your non-followers are aware that they’ll receive extra value from signing up for your mailing list, they’ll be more likely to do so.
- Exit intent popup discounts
If a customer is about to exit your eCommerce store without buying anything, a well-timed and delivered popup discount offer can be just what they need to change their mind.
Brooklinen.com is a good example of an eCommerce site that uses exit-intent popup offers — in the form of free shipping — to convince visitors to make another order.
Having said all that, now let’s take a look at customer-focused discount tactics that can reinforce customer behavior.
- Value-adding discount
Value add offers come in different shapes and sizes. Basically, they are given to those customers who have supported the business. You can either offer a small free gift, free shipping, or free delivery to the customer’s address.
- Membership discount
If eCommerce marketers were to sit around a fire and share their worst fears or nightmares, a low customer retention rate will be among the mentioned fears. It’s difficult for eCommerce businesses with a low customer retention rate to stay afloat and be in business for long. Why?
Because it costs way more to get new customers than to retain old ones. So one way of ensuring a high customer retention rate is to deploy membership discounts. This tactic positively reinforcing customers to be loyal to your brand.
- Quantity/Volume Discounts
Volume discount is a smart way of convincing customers to purchase in bulk. For instance, a clothing eCommerce website that employs “steps” in its quantity discounts can offer shoes at $10 each, five for $40, and 10 for $75.
There are many ways to go about this tactic -some eCommerce brands offer loyalty cards that give customers a free item after they have purchased a certain number of items.
Various marketing and promos such as “ buy one get one free and buy two and get one free “ are associated with the concept of quantity discount. Quantity discounts can also be used as a product-focused tactic -especially when you want to move out of the goods from the warehouse.
Product-focused discount tactics
This approach is usually taken with the aim of selling an outdated product, clearing old stock, or promoting a recently launched product.
That said, let’s take a look at how product-focused tactics work:
- Product in Decline
When sales of a product start to go down, that can be an indication that the need for that product is declining. Faced with such a scenario, some small businesses may not afford to offer a new product that will help keep the customer retention rate high.
Improving or changing the features of an evergreen product may not always work -but adjusting the price can keep the product relevant. Yes, you will probably make less profit, but if that’s the only shot that keeps customers back to your store, why not give it a try?
- Promoting a new product
When you launch a new product, you want as many people to buy it as possible, right?
Many eCommerce brands are now putting even more effort into driving up their pre-order sales, by offering early-bird discounts on a product that is yet to be released.
Here’s a good example from CarKit AI :
Not only will this tactic increase awareness and traction for the new product, but it will also help gauge the demand for the new product.
- Stock clearance discounts
Many clothing eCommerce businesses experience the problem of excess stock, usually when it is the end of the year or season. The need to clear old stock to make room for new stuff is a common reason why most eCommerce shops may need to offer clearance discounts.
Conclusion
Discount tactics may emanate from different strategies, but they all have commonalities within them. They generate revenue and increase sales. Focusing your discount tactics will help you align your pricing strategy in a way that works well with your specific business model.
Originally published at https://www.invespcro.com on April 22, 2020.
