Many businesses are wary of giving away discounts, and rightly so. When deployed incorrectly you can get yourself into trouble and put unnecessary financial strain on your business.
However, when deployed correctly discounts can be a revenue generating power tool!
In 2020 alone, our customers redeemed over $27,000 dollars in discounts! That’s an entry level salary right there!
Not a huge number, but not a small number either. You may think it would be crazy to allow for so many discounts to be claimed, but given the opportunity I would have gladly had customers redeem twice that. Here’s why…
A discount redeemed means money in the bank!
When someone redeems a discount, that means they also bought something! So the more discounts customers claim, the more sales you have.
Given the choice between giving a discount for every single sale, or never giving out discounts but never making a sale, which would you choose?
Discounting your services doesn’t mean losing money.
When a discount is redeemed that means your profit margin, the money you get to take home at the end of the day is smaller which makes it feel like you’re losing money.
There is an easy fix to that! Set your prices with discounts and sales in mind! If you know that you are going to have a Black Friday sale, or an opt-in discount incentive, set your prices to allow for a healthy profit margin after the discount is applied.
If you sell something that costs you $50 to deliver, and you want a $25 profit margin, then your price should be $100, not $75.
At $100, you can give all the way up to 25% off and still come home with your minimum profit margin.
Discounts are a tool for closing sales.
If someone is on the fence and their decision rests on them receiving a deal, why not give it to them?
Some shoppers will only ever buy if they can get a deal, so make it easy for them to get one. It doesn’t have to be the deal of the century, but as long as they perceive that they saved money that’s often good enough.
You can never give away “too many” discounts.
I hear this sometimes, “we don’t want to give out too many discounts?” Why not? What do you have to lose by giving away too many discounts?
On Groundhogg.io there are literally dozens of ways people can get 10-15% off, and we don’t make them difficult to find either, but more than three quarters of all sales still come at full listed price!
For every discount redeemed, that’s a new customer! We want more customers!
You CAN give away too much of a discount.
I don’t believe in too many discounts, but you can get into trouble giving away too much of a discount! This is especially dangerous for products which want to be the premium option in their market.
If you’re giving away hundreds of discounts for 10-15% off, that won’t impact your brand’s perceived value very much because the total purchase price is not far off the listed one. People feel lucky to have received the small discount they did get and your premiumness will remain intact.
However, if you start giving a consistent 30-50% off people will start to recognize a pattern and realize they never have to pay full retail, and shouldn’t. All of a sudden you’re not an upscale premium store in the bougie part of town, you’re a big box store with an “everything must go” sign out front.
These two different perceptions impact the kind of customers you’ll get, and the kind of prices you can ask for.
Premium clothing brands don’t heavily discount in-store, neither should you! (Unless you want to be perceived as the bargain option)
It matters how customers get a discount!
We don’t want to make it too easy for a customer to get a discount, but we also want to make it really easy.
That’s a bit of a paradox, but hear me out.
If we just serve up the discount on a silver platter it’s less enticing for the customer to use it. But if they find the discount, the perception is that they beat the system and are much more likely to use it.
How to give out discounts the right way.
There are a few clever ways to give out discounts without making it too easy. (These are all strategies we deploy ourselves by the way, do with that information what you will.)
Have an opt-in in your website footer that sends an email with 15% off. This one is super effective and also has the added benefit of converting 1% of all site traffic into subscribers.
Added a discount code exit intent popup on your checkout page. This is a super easy way to increase conversions!
Send a cart abandonment email with a time restricted discount. This converts over 10% of our abandoned carts into new customers!
If they ask for one, give them one! Choose a number between 10-15% and create a code for them, but if they ask for more say no as giving more will decrease your brand’s value.
Give a super secret checkout discount. I didn’t come up with this, but it’s incredibly effective. One of the most annoying things about redeeming discounts on other sites is most of the time they don’t work. You just get a message like, “Discount invalid.” This is a crummy experience and can lead to cart abandonment which we don’t want.
So instead, we give them a discount no matter one (as long as they try to redeem one) so if they enter an invalid code we automatically apply a code that works for 10-15% off instead. It may not be what they expected but it’s better than nothing! (again, we do this ourselves, try it out for yourself!)
When customers find the discount, their immediate reaction is, “Haha, sucker!” But we’re thinking, “this is what we wanted all along.”
Should discounts be single use?
In most cases I think you should make discounts only redeemable once per customer, otherwise that customer will never be obligated to pay full price for anything and that will also decrease your brand’s value.
Should I use the same code for everyone, or auto generate discount codes?
If you’re using single use generated discounts codes it’s because you do want people to claim them, which is fine and recommended if you’re giving out bigger discounts (30% and above).
I prefer to use the same code for everyone and simply make it so that the same customer can only use it once.
The reason is tracking, and seeing how often a discount code is used. Plus if you use the same code for multiple people it gets shared which turns into more sales, which is a good thing!
Okay, I know about discounting the right way, what are my next steps?
- Clean up any discounts you currently have active and make sure they are all less than 30% to maintain a premium brand perception.
- Make it easier for customers to access a discount, but not too obvious!
- If you need to, increase your prices so that giving out discounts does not impact your miniman profit margin.
If you have any further questions about using discounts in your business, feel free to reach out to us, we’re standing by!