Discount Pricing Strategies

In an online world, customers are savvy and will check the price of a product from multiple retailers before making their decision. But the price isn't all they take into consideration. Shipping costs, free gifts, coupon codes, customer service, after sales service, warranties and loyalty rewards also make up some of the deciding factors. 

What is Discount Pricing?

Discount pricing refers to the retailers decision to sell a product or service at a lower listed price. They can be permanent, such as free shipping over $100, or temporary such as a percentage discount for a set time period. There are multiple reasons why you should offer discount pricing:

• attract new customers
• booster customer loyalty and engagement
• reduce old inventory
• increasing online conversions
• encouraging repeat purchases
• driving sales

Beforehand Tasks When Using Discount Pricing Strategies

Before selecting which discount pricing strategy you are going to use, you need to firstly develop an overview of the entire project. This will include you needing to:

• Keep tabs on your margins - make sure that you are monitoring your profit margins, as while sales volume may be high, profits may not be. Ensure that your discount takes into consideration of the acceptable profit margin you wish to receive. 
• Consider your brand positioning - sometimes it is not in your brand's best interests to use discount pricing. If you have a luxury brand, customers expect a certain level of exclusivity and quality, with discounts undermining this. For other businesses, discounting can attract positive attention to your brand and help you remain competitive through welcoming new customers.
• Customise your discount promotions - a one size fits all discount may be easy to manage, but a targeted one is likely to get you better results. Focus each promotion on a sub section of your target audience, using the information you have about them to your benefit.
• Consider customer price expectations - if you discount frequently or at a certain time of the year, customers will wait to make a purchase once items go on sale. This can lead to reduced profit margins as customers will always expect a discount and will wait for it. 
• Think about limiting available options - there is no rule that all of your products must be discounted. Consider only discounting those you want to reduce inventory of such as seasonal types.
• Manage perceived quality issues - offering discounts can also cheapen the perceived quality of your product too, making customers value them less.

Once you have worked through the points to consider when using discount pricing strategies, it's then time to choose the ones you want to use.

Choosing the Right Discount Pricing Strategies

When choosing your pricing strategies, you will firstly need to set your discount objectives. What will this strategy do for your business and potential profit? Do you want to use it to increase customer loyalty, grow your customer base, test a new product in the market, raise the average order value or shift old stock. Your chosen discounting objectives will then drive which discount strategies you will use.

• Buy one, get one free (BOGO) - always a popular one and motivates customers to buy more than they originally intended.
• New customer discount - encourage visitors to become customers by giving them a one-off discount on their first order from your store. 
• Tiered discounts for cart thresholds - if the cart total reaches a set value, a discount is applied. If a higher value is reached, then a larger discount is applied.
• Early bird VIP discounts - get excitement started early on by promoting a discount to your VIPs or previous customers.
• Flash sale - offering a short time discount gives customer a fear of missing out, and can drive a large number of customers to buy quickly.
• Subscription discount - a website visitor gives you their contact details for a online discount code they can use.
• Pre order discount - you have a new product coming instore, so build the hype with announcing a pre-purchase discount on orders made beforehand.
• Product bundle discount - group together a range of products to sell at a lower price, such as picnic products or clothing and accessories.
• Free shipping - this could be free shipping over a set amount, or with a code the customer enters upon checkout.
• Quantity discount - if you buy two shirts, get 25% off.
• Free gift with purchase - a small gift with purchase encourages customers to add certain products to their carts.
• Loyalty discount - a discount reward is given to repeat customers to use on their next purchase.

Our popular eCommerce platform lets you configure automated discount formulars and enable promotional codes. In fact, we have so many different ways to craft the perfect discount that you really need to see our Discounts and Promotions page for yourself!