Discounts and promotions are something every e-commerce business owner should think about carefully.
It’s a tricky situation, you want to include lots of discounts and promotions to keep customers coming back to your store, or shopping with you in the first place, but you also want to keep your profit margins high.
And using too many discounts, or the wrong type of discounts could seriously cut into your profits.
So in order to make sure your discounts and promotions only benefit your business, we suggest:
Decide firm objectives to understand what you hope to achieve from discounting
Ensure you have a good understanding of the right metrics you should be tracking so you can measure the effectiveness of your discounting strategy.
With that said, in this blog post, we’re going to show you 4 discounting and promotion strategies in eCommerce you can use today to bring about measurable profitable results.
Benefits of e-commerce discounting +(why you shouldn’t)
The first benefit of using promotions and discounting strategies within your e-commerce store is the sales volume you can drive to your business. Think about it, everybody loves a deal and so if one of your objectives is to sell out on a certain line of stock, using a promotion or discount strategy could be a useful way to do that. (Later in this article, we’ll look into the exact strategies you can implement).
Secondly, in the competitive world of e-commerce, you’re constantly vying for your customer’s attention competing with your competitors, not just on price but brand too. So, one way to stand out is to use promotions that make your customers feel good.
While we’re talking about your competitors, you can use effective discount and pricing strategies to help customers compare your products to other brands.
But with every e-commerce strategy, you shouldn’t dive in head first without setting proper goals.
So before we look further into the strategies, ask yourself what you want to achieve with your discounting and promotion:
- Do you want increased revenue?
- Do you want to improve customer loyalty?
- Do you want to encourage new shoppers to spend their money with you?
- Do you want to gain exposure during a specific holiday (like Christmas or Halloween) with a holiday deal?
Increasing average order value (AOV) with bundled discounts
Average order value (AOV) allows you to see how much revenue (on average) you generate per checkout.
To calculate it, simply do:
AOV = revenue / conversions.
Bundling products together is a great way to encourage customers to spend more money. They feel as though they are getting a good deal, especially when items go together nicely.
BaubleBar, accessories company allows their customers to put together their own bundle. They can mix and match from a number of items and pay $38 for the total.
What’s more, when you get to the checkout, it mentions the price is reduced from $96 to $38, further reiterating that it’s a good deal.
The reason why this works so well is that it encourages shoppers to buy more.
If this offer didn’t exist one shopper might simply buy one bracelet and perhaps didn’t even consider the idea they could build their own stack. But presenting the offer in this way shows them the possibilities available.
When you bundle your products together and focus on increasing your average order value, it shows you more about your customer’s buying habits. Knowing their buying habits allows you to successfully tailor future deals to them.
For example, you could see whether customers were actually using the three bracelet bundle deal, or whether they were emailing you to tell you they’d prefer a 5 product bundle deal.
Knowing crucial info like this is is paramount to helping shape your entire customer acquisition strategy.
Do take in mind, though, that you should seriously consider whether you can afford to bundle products and think carefully again about which products you bundle. Although you will have an increase average order value, the margins on each individual item will be lower.
Long-Term discounts for long-term customers
Every e-commerce business should be thinking about both customer loyalty and customer retention.
You don’t want to win customers over only for them to leave you the next month and spend their money someplace else.
To encourage people to shop with you long term, you need to provide some really impressive long-term offers and encourage them to commit to shopping with you.
One vendor who does that really well is Amazon. As you probably know, Amazon has a Prime service that gives customers the chance to watch amazon prime video shows as well as make use of next day free delivery.
Amazon offers two payment options.
£79.00 a year
£7.99 a month
In real terms, if you paid monthly, then over the year you would spend: £95.88
But the benefit of offering two payment plans like this is that if you buy the year in advance, you’d already paid for the entire year, whether you use the service or not.
And if you pay per month, Amazon gets more revenue. Even though paying monthly is more expensive than paying for the year in advance, for some customers, it may feel as too much of a commitment to pay for the entire year in advance.
Although Amazon probably isn’t too concerned with their cash flow, for smaller e-commerce stores, offering prepaid deals are a great way to understand your customer loyalty further and provide a better service.
If you’re wondering whether your e-commerce store would benefit from long-term prepaid promotions, then consider whether you have any subscription type products as these work best for this type of promotion.
Free shipping is a popular discounting and promotion strategy many e-commerce owners opt for.
According to shoppers, 73% stated that free shipping is the #1 criterion for making a purchase.
It’s one of the most well-known discounts and promotion strategies that e-retailers use and that’s because it’s so effective.
You should consider using free shipping offer if it works with your profit margins, for example, consider the weight and size of your product. And if you do include a blanket wide shipping, incorporate it into the total price.
We’re going to look at two different ways to approach free shipping: Blanket wide free shipping and free shipping after spending X amount.
For example, AO.com, electric good store, offers free delivery for customers when they select standard delivery, but also allows the customer to “upgrade” their free delivery to a paid version with better benefits.
So if a customer really needs the purchase the next day, they can opt for that pricing option. However, if they’re happy to wait for the item to arrive when it does, they can stick with the free standard delivery.
UK supermarket chain Iceland has a different approach when it comes to free shipping.
Instead of offering free shipping on all orders and purchases, they offer free shipping for anyone who spends more than £20. This even works if you shop in store first.
A great initiative for those who want to do a large food shop, but perhaps don’t have transport themselves to carry it all home.
It would also work nicely for those who perhaps aren’t strong enough to carry a large load of shopping home themselves (like the elderly).
But in terms of Iceland’s strategy, it works because it stops people buying one item and demanding free delivery.
If they offered blanket wide free delivery then technically you could order one singular chocolate bar and insist on it being delivered for free.
Holiday promotional discounts
Luckily for e-commerce stores, there are holidays and celebrations all throughout the year. This means there are plenty of opportunities to offer special discounts and promotions celebrating a range of different events.
Some events naturally encourage you to provide promotions or discounts (and in fact, during these times customers expect discounts – more on that later) and some allow you to get really creative with your promotion strategy.
We mentioned earlier that some holidays events customers expect to see discounts, these include Black Friday and Cyber Monday, Boxing Day and New Years Day. In fact, on these days, customers will be actively looking for discounts, deals, promotions and coupons.
For example, Quirky, online retailer, sent out an email to their customers to let them know there would be up to 50% off, as well as free U.S shipping on orders over $30.
The benefit of letting customers know about this deal via email is that you catch their attention much quicker.
They might have bought something from you a while ago, but forgot that you existed.
A friendly reminder like this could be the difference in them coming to you on Black Friday or not.
What’s more, because you’re emailing them, they’ve already given you permission to contact them, meaning they’re somewhat interested in your products and therefore are much more likely to make a purchase.
The great thing about holiday discounts, especially the ones where customers come to expect some sort of offer is that they’re already in the buying mindset.
They enter your website on these days looking for great deals knowing that in a few days, these offers might not be available.
Discounting and Promotion Strategies in ECommerce
In this article we looked into 4 different ways you can use discounting and promotion strategies in eCommerce to achieve one of four things:
- Increased revenue
- Improve customer loyalty
- Encourage new shoppers to spend their money with you
- Gain exposure during a specific holiday (like Christmas or Halloween) with a holiday deal
We also looked at the reasons and benefits of why you should consider using promotions and discounts as well as some considerations to ensure your profit margins stay high.
Use the example use cases here to inspire your own business.
We hope this article has helped you think further about your own promotion and discounting strategy and provided you with some inspiration for techniques you can begin implementing in your ecommerce store.
What promotion and discount strategies have you used? Leave a comment below with your ideas! I’d love to read them!