How to use discounts to uplift profits and reach more customers

You’re considering offering discounts.

Maybe you’re looking to attract more customers, or want to reward your most loyal followers with an exclusive promo code.

So you go online for what you think will be a few minutes of research, but it turns into hours of conflicting information.

No one seems to agree on how to use discounts. You’re frustrated, still don’t know the best way to use discounts, or even if you should use discounts.

Today, let’s clear up that confusion. You absolutely can use discounts to grow your profits, but you have to be strategic about it. The more you plan your discounts out in advance, the better your end results will be.

To that end, we’ve put together six proven discounting strategies to help you get started. Before we dive into them, however, let’s talk about the basics behind coupons and how to use them.

How to use discounts to grow sales

To use discounts to boost your sales and reputation, you must figure out:

1. When you will offer discounts

2. Why you’ll offer discounts

3. How often you will give out discounts

4. Who will receive your discounts

Let’s dig into these four criteria in more detail.

Step #1. Decide when you will offer discounts

Event-based discounts can work for brands of any size or niche, but you have to get the timing right.

For instance, it may be easier for your brand to sell more on Black Friday and Cyber Monday , when shoppers are on the lookout for great deals, especially if you have a discount code to share.

But, because shoppers are on the lookout, you’re going to need to do something extra to standout from the crowd. BaubleBar is a great example of doing something special during the event: at 35%, their discount was quite generous even by Black Friday standards.

However, they wisely limited the deal to only 12 hours, giving customers the critical sense of impetus to convert before the exclusive window closed.

Of course, traditional shopping holidays aren’t your only option.

Just having a discount at all can make major waves for your bottom line, especially when you consider the fact that 53% of millennials and 40% of baby boomers say they always look for a discount before buying something online.

So with that in mind, offering a discount during a less popular time of the year is worth exploring as a digital product creator, as well.  

You could build a discount around a holiday specific to your business, such as Programmer’s Day if you offer products in development, or World Vegan Day if your products are in the culinary realm.

Alternatively, you could offer discounts for events unique to your brand, such as your business anniversary or to mark important milestones.

Podia creator Reuven Lerner , for example, offers promotions both to mark Black Friday and his birthday.

Likewise, PlayStation sends emails to subscribers to mark their first anniversary of joining their list.

Of course, don’t underestimate the power of using discounts to promote things like launching a new membership site or a new course, either.

Regardless of when you decide to offer discounts, never be afraid to try out events relevant to your audience.

Experimentation is the name of the profit-boosting game -- as is staying goal-oriented about your couponing strategy.

Step #2. Clarify why you want to offer discounts

While discounts are used primarily to drive sales, they’re also a superb way of encouraging and rewarding customer behavior.

So when you’re planning your discounts, it’s as important to consider why you want to give a discount as it is to determine how high of a discount you can offer without hurting your margins or brand.

For example, do you want your discount code to entice leads to make their first purchase? Thank long-time customers for their continued loyalty and support? Launch a new online course ?

Whatever the reason, having a well-thought-out discount strategy is a win-win for your customers and bottom line.

Take, for instance, Podia creators Becky Mollenkamp and Mojca Zove .

Becky told me she’s used discounts in the past for a variety of reasons, from driving interest in an evergreen course to rewarding long-time customers for their loyalty and repeat purchases.

Similarly, Mojca offered subscribers a 25% discount for the pre-launch of her “The Science of Facebook Ads - Professional” course and earned $10,000 in the first week.

Becky and Mojca are just two of the many examples of successful, strategic discounting out there.

Still, don’t feel you have to offer steep discounts to your customers right away, especially if you have tight margins or are still figuring out how to price your online courses .

Mike Moloney, the founder of FilterGrade , put it best when he said :

“If you have limited margins, I definitely recommend using lower discounts, somewhere in the range of 10% - 20%. These are still incredibly effective at converting new customers.”

Of course, after you determine how much of a discount you’re going to provide, you’ll need to decide how you’ll present it, too.  

The Rule of 100 states that for items under $100, consumers tend to prefer seeing the discount as a percentage.

Conversely, when looking at items over $100, consumers prefer to see the actual dollar amount saved.

As an example, let’s say you want to buy a $50-a-month membership at a local co-working space.

This week, they’re having a special promotion: The monthly membership is 20% off. Would you rather save 20% on a monthly membership, or have $10 taken off the monthly fee?

Or, if you were looking at a $300 course from your favorite creator, would you prefer to save $100 or have 33% off the original price?

Chances are that you would choose to save 20% and $100, respectively.

At least, that’s what Wider Funnel discovered when they ran an experiment around discounting.

In their experiment, one group was offered percentage-based discounts, another group was given dollar-based discounts, and the final group was given a mix of the two based on the Rule of 100.

After three weeks, the third group’s pricing model resulted in a 2.29% increase in per-visitor revenue.

Bottom line:

While there are no absolute rules in the world of consumer psychology, it’s worth testing what discounts resonate the best with your audience.

But your tweaking shouldn’t stop there. After settling on the ‘why’ behind your discounts, you have to nail down the ‘how often’.

Step #3. Map out how frequently you want to offer discounts

Promotional discounts are great, but if you offer them more than a few times a year, you’ll condition your customers never to expect -- or want -- to pay full price.

So to keep things fresh and exciting for your followers, we recommend keeping it to just a few times each year.

But aside from limiting your discounts’ frequency, you should also think about limiting how many products you offer a discount for at a given time.

Research has suggested that sales become less powerful when consumers see that multiple items have sales signs at the same time.

Likewise, you may want to offer less frequent discounts but extend how long a discount runs.

A steadily decreasing discount strategy -- in which a discount promotion has a smaller discount in between the initial offer and the full price -- could ultimately serve your revenue and help you maintain shoppers’ discounting expectations better.

That’s what one research study, which examined the effects of the steadily decreasing discount strategy on wine bottle stoppers, found. Using a graduated discounting strategy over 3 days resulted in a 55% increase in profit .

Conversely, when the discount wasn’t graduated, there was only a 5% increase in profits.

Basically:

Although restraint might seem counterintuitive when your end-goal for discounts is boosting sales, a little temperance can go a long way towards nudging customers to make a purchase sooner rather than later.

Step #4. Decide who you want to offer a discount to

Everyone and their Aunt Muriel love discounts.

In fact, customers are 11% happier and more relaxed when they can use a coupon to make a purchase.

But while it’s admirable to want to make everyone happier by giving everyone discounts, you need to be mindful of who receives discounts.

After all, you don’t want to encourage the wrong kind of behavior in a customer who ultimately isn’t a good fit for your business.

Consider instead giving out exclusive discounts to only the demographic that makes sense for your brand and goals, whether that’s new subscribers or long-time customers.

By doing so, you’re limiting the amount of money that can be lost on a given sale while also encouraging behavior in a specific customer segment you want to nurture.

This is the gist:

Like your timing, you need to be methodical about how you give discounts. Give them out to the wrong people and you can lose money, time, and hamper your long-term profit goals.

Offer them to the right people, on the other hand, and your risks are minimized while your potential rewards are maximized.

Speaking of offering, now that we have the how-to down for discounts, let’s check out some specific strategies for using them.

Six discount strategies to uplift your bottom line

Although many factors affect which discount type is best for your brand, the six approaches outlined below work for first-time and veteran creators alike.

Strategy #1: Convert leads into customers

Offering discounts to new subscribers may seem like a no-brainer, but be careful about using them as an incentive for signing up for your list.

Using a discount code as a lead magnet may attract people who are genuinely eager to purchase from you, but it can also attract one-time customers who have no interest in hearing from you, joining any of your online communities, or buying from you again.

And frankly, that’s not really good for you in the long-term.

But that doesn’t mean that you should never offer discounts to new subscribers.

After all, 45% of shoppers have said having a discount is a compelling reason for them to add another item to their shopping bag and another 60% of customers have said that they will make a purchase if they have a coupon.

‍ Lo & Sons , which sells high-quality laptop bags, suitcases, and more for female professionals, is an excellent example of how to offer discounts as a sign-up incentive.

While any subscriber is eligible to receive 15% off of a Lo & Sons product, the discount is limited to full-price purchases only.

Don’t feel comfortable using a discount code as a lead magnet?

Not a problem -- send it as a small gift in your onboarding series instead, just like Tattly did in their new subscriber email:

Now I know what you’re thinking: Why should you give discounts in an onboarding series if you don’t want to use it as a lead magnet?

Well, consider this: 32% of customers want a discount within one hour of revealing themselves (such as subscribing) to a brand, and 52% of customers are willing to exchange personal information for a personalized discount or offer.

Even if your new subscriber is willing to pay full price, there’s a good chance they’re still hoping for a special (and relevant) promotion.

It’s that second qualifier -- relevant -- that you should focus on. The best way to ensure your discounts are relevant to your audience is to segment your subscribers with different landing pages for each special offer.

By doing so, you’ll know which segment of your audience is the most interested in which products, and can send targeted email sales sequence to help nurture your relationship with them further. If you'd like to dig into email sequences for digital products more, check out this guide on email marketing for online courses .

Otherwise, keep what entrepreneur Simon Sinek said in mind: “ People don’t buy what you do, they buy why you do it. ”

Bottom line:

Whenever you offer a discount, ensure it’s ultra-targeted to the audience you’re trying to reach. Everyone may love a discount, but a discount that brings customers in the door who have no interest in continuing a relationship with your business ultimately erodes your long-term profits.

Strategy #2: Recover abandoned carts

Do you want to know something mind-boggling about online shopping?

The average abandoned cart rate is 75.6% , with around 34% of shoppers abandoning their online shopping carts because they’re just casually looking at products.

Nowadays, many online sellers use an abandoned cart as a reason to immediately send out a discount in hopes of completing the sale.

However, we don’t recommend that you do that -- not right away, at least.

Sending out discount codes soon after a customer abandons their cart may encourage some customers always to wait for you to send a promotional code before making a purchase.

Instead, it may be better to send your customers a series of abandoned cart emails in which you try to lead them back to their cart slowly.

You could offer a promotional code in your first reminder email, and mention it once or twice again in your series.

Alternatively, you could put it towards the end so that only those who are opening your emails and are interested in what you have to say would receive it.

Again, you don’t have to give one at all if you don’t think it’s suitable for your brand.

Nike’s email below is a noteworthy example of reminding customers to revisit an abandoned cart without having to incentivize them with a coupon code:

Even if your email marketing platform doesn’t have a way to track abandoned carts, there are still ways for you to recover potential sales.

For example, leads who are active in your online groups or who frequently email you with questions about your products are all great candidates for receiving a promotional discount.

Main takeaway:

Whether you send emails to leads for abandoned carts or know someone teetering on the edge of conversion, offering discounts is an effective way to convert curious first-time leads into long-time happy customers.

Strategy #3: Encourage referrals

Whether you’re a new or seasoned creator, I’d bet your business could benefit from having more referrals.

Referrals are one of the lowest-cost but highest return-on-investment (ROI) marketing tools out there.

Around 75% of businesses have said referrals are the most cost-effective means to acquire new clients.

Beyond being cheaper to convert, referred customers have a Customer Lifetime Value (CLV) 16% higher than non-referred customers with similar backgrounds and have a higher long-term retention rate to boot.

Put simply: Referred customers cost less money to acquire, tend to spend more money, and stick around longer than customers who weren’t referred to your business.

Call me crazy, but that sounds pretty dandy.

Referrals can take on multiple forms, by the way.

You could use affiliate marketing to encourage referrals by thanking your customers with cash rewards.

Or, better yet, to reward both your loyal customer and your newcomer.

Peloton’s referral program is a notable example of how existing customers and their friends benefit from referrals.

Those who are referred to Peloton receive $100 to use towards accessories for their purchase while existing customers receive $100 off their next clothing order through the Peloton Boutique.

Similarly, existing Airbnb users can send friends a $40 credit and receive $20 when their friends travel or $75 when they host an Airbnb lodging.

And lastly, Tictail’s referral email may be the simple program that your brand needs. After making their first purchase, existing Tictail customers and their friends or family receive a 10% coupon.

Whatever form your referral program takes, remember you shouldn’t feel forced to offer a high discount or cash reward if your bottom line can’t quite handle it yet.

Offer the best products, customer service, and referral incentives your business can afford, and your customers will take care of you in turn with referrals and word-of-mouth marketing.

Strategy #4: Create a sense of scarcity

Scarcity is typically something humans avoid, but when it comes to business, scarcity can be a huge catalyst for driving customers to make a purchase.

From people camping out to buy Apple’s iPhone X to buying out Yeezy sneakers in just minutes, items that are viewed as desirable and scarce motivate consumers to make purchases quickly.

If you’ve ever booked a hotel through websites like Booking.com , you’ve seen first-hand how scarcity and demand are used to entice customers to make a purchase swiftly.

It works for cookies, too. Let me explain.

In a famous psychological experiment , test subjects were shown two jars of cookies.

The jar with fewer cookies was seen as more desirable than the jar with more cookies.

Similarly, when the jar with more cookies began to dwindle down, those cookies -- now perceived as scarce -- were seen as more desirable.

A separate research study also demonstrated the scarcity principle when it found that having a variety but a limited number of products helps boost sales, too.  

Basically, people tend to attribute higher value and desirability to things they perceive as being scarce, especially if others want them.

The why behind it isn’t entirely clear, but some of this scarcity-driven sales boost could be linked back to a principle called Hick’s Law . Hick’s Law states that when we remove stimuli and choices, we can make decisions more quickly.

That’s why items ranging from websites to washing machines are being designed with sleek, minimalistic interfaces -- so users can take the desired action without confusion or hesitation.

And when it comes to sales specifically, Hick’s Law may encourage purchases and increase the sense of scarcity by taking away decisions such as putting off a purchase until later or waiting until something is restocked or relaunched.

These two phenomena help explain why products like Nuka Cola , a limited edition soda sold to promote the release of the Fallout 4 video game, sold out quickly in stores and even led to many reselling it online at a high markup.

But before you begin using scarcity to drive sales, we must extend a word of caution: Only use genuine scarcity to promote sales.

Faux scarcity may have been a viable tactic before the internet came into being, but with how savvy and well-connected customers are nowadays, being dishonest about the availability of your products and discounts is a major no-no.

Take, for example, these emails from Levi’s . They sent out an email promoting a “last chance” to get 30% off anything on their site, only to offer the same discount a little over a week later, and then again a week after that.

So even though it may be tempting to advertise only two slots left in your membership program when there are really 10, or two days left to sign up for your course when you plan on allowing enrollment for five more days after that -- don’t.

Your customers will eventually catch on, and when they do, all of the trust you’ve built to then will take a serious lash.

The point is this:

Don’t lie about scarcity. If you create limited-time offers, don’t cheapen the offer by deciding at the “last minute” to extend the sale by a few days.

The time you set on your limited-time offer (which is super easy to do on Podia , by the way) needs to be final.

Never attempt to exchange the trust that your customers have in you for some extra sales. It never pays off in the end.

Strategy #5: Give exclusive offers

People love having things that seem rare, especially if it’s something highly-desirable and only available to a select few.  

Think Lamborghinis, private islands, and admission to prestigious universities -- they’re considered valuable and desirable in their own right, but their exclusivity (only people with enough money can afford them) makes them even more alluring.

As a digital product creator, exclusivity is something you’ll definitely want to keep in mind when pricing and discounting your products.

Consumers -- 60% of them , in fact -- really, really like receiving exclusive discounts and promotions.

Nearly 60 million Americans have said the thought of receiving an exclusive offer makes them feel like Rocky Balboa after running up the steps of the Philadelphia Museum of Art.

Similarly, 94% of consumers have said they would take advantage of an offer that wasn’t given to the general public, and another 47% of shoppers have said receiving an exclusive offer makes them feel excited.

This email from Moo is just one example of how an exclusive offer can build customer excitement.

Aside from its enticing copy and interactive content , Moo’s offer is great for customers because it generates a discount code unique to them.

Depending on what information you know about your customers, you can also combine exclusive offers with event-based discounting, such as offering a customer a discount to celebrate a year since they signed up for your email list.

Just remember that when it comes to event-based discounts, less is more -- you want your subscribers to be (nearly) as excited for your event-based discounts as they are for their birthdays, anniversaries, and other special but rare occasions.

Too much of a good thing, at least when it comes to discounts, can ultimately be a bad thing.

Strategy #6: Use a loss leader

If you’ve ever purchased razor blades or printer ink , you’ve probably bought a loss leader.

A loss leader is a product or service sold below its actual worth so a business can later entice customers to purchase a higher-priced product.

Loss leaders typically lose money for a brand in the short-term but earn them money in the long-term via increased loyalty in their brand and more higher-value purchases later on.

Retailers recoup losses from selling razor handles or printers at lower prices by selling razor blades and ink cartridges -- and other accessories which must be regularly replaced -- at much higher prices.

Still not convinced? Consider this: It can be up to 60% to 70% profitable to sell to an existing customer, but only 5% to 20% profitable to sell to a first-time shopper.

So while it may sound like this only works for large businesses that have money to burn, loss leader products are totally usable by smaller creators as well.

Let’s consider an example:

Suppose that you’re a creator who teaches other small businesses about how to use Instagram as a marketing tool.

You offer digital downloads, memberships, and online courses. Your online courses and membership program are your highest-priced products.

Because of their higher price, many first-time customers are afraid to purchase them without knowing if they will live up to their promises.

So, you use an ebook as your loss leader.

You know that the ebook would be fairly priced at $40, but to attract more customers, you sell it for $10. Since ebooks are some of the most popular digital products to sell online, it’s an attractive offer for your uncertain prospects.

So they buy it.

And then they come back.

Even though you lose money in the short-term for the ebook sale, you recoup and even exceed your short-term losses by earning a loyal customer. After all, if you provided highly-valuable and relevant content in a $10 ebook, your $300 online course must be out-of-this-world.

Loss leaders can also be used to upsell a customer on another purchase.

If you’ve never heard the term, upselling occurs when a user is about to make a purchase . (You can read more about them in our recent article on how to use upsells and cross-sells , if you're curious.)

As they’re about to check out with your loss leader, you can give them an offer to buy a more expensive product or buy it in addition to the first product they wanted to purchase.

For example, you can add an upsell function to your online Podia courses and digital downloads to encourage customers to purchase more expensive products from your website.

Now if that strategy sounds crazy, it’s not; it’s widely used by some of the most well-known companies and sellers out there.

For example, Amazon’s famous “Frequently bought together”  feature recommends products that other customers typically purchase with whatever item you’re looking at.

But if you’re worried that upselling may seem too pushy, consider this: By recommending other online courses that your customers might like, you’re helping them to save the most precious resource of all -- their time.

And that’s worth money in the bank for both of you.

Use discounts to raise your profits and delight your customers

When working out a discount strategy for your brand, you don’t need to decide between cheapening your brand but getting more sales or never offering discounts while also never giving your followers a little surprise.

There are four things to keep in mind when you’re working out a discount strategy:

• Think about when you want to offer discounts, such as during the end-of-the-year holiday season or for a brand-specific event.

• Decide why you want to offer discounts, whether it’s to boost sales during a slow period or give your loyal customers a gift.

• Consider how often you can share discounts without hurting your bottom line and cheapening your brand, too.

• Finally, settle on who you’ll give discounts to, whether it’s a group as broad as long-time or new customers or customers who’ve spent over a certain amount with your brand.

All in all, the best way to figure out whether a discount or coupon can increase your revenue is to simply try it.

And speaking of trying things, you can employ the strategies you’ve learned today in just a few clicks on Podia. Don’t just take my word for it, though: experiment for yourself with a free 2-week trial .

Now, creators, go forth and spread discounts that will surprise and delight your customers -- your bottom line will thank you for it.