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:
- When you will offer discounts
- Why you’ll offer discounts
- How often you will give out discounts
- 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.
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.
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.
“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.
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.
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.
As entrepreneur Simon Sinek said: “People don’t buy what you do, they buy why you do it.”
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.
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.