Discounting 101: 3 Ways to Protect Your Brand’s Bottom Line

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Discounting 101 is a series on all-things discounting strategy, based on the ebook, “The Ultimate Guide to Discounts”available for download now. Check out Part 1, Part 2, Part 3Part 4 and Part 5 of the series for more insights!

Most people are creatures of habit. If you saturate your customers with discounts three times a day, every day, it’s a safe bet they’ll get so accustomed to buying on sale that they’ll never pay full price for anything you offer.

How can you avoid creating this bad habit? Restrain yourself! It’s tempting to offer a discount at every opportunity, but that won’t serve your long-term goals at all, even if you get a short-term bump in revenue.

In the previous post in this series, we talked about personalizing your interactions with customers according to  the source of your customer contact c, their geographic location and the optimal time of  day to reach them. Now we’re going to talk about techniques that can keep you from going overboard with discounts, both in the testing phase and during the full rollout. Here are three techniques you can adapt to your brand — but remember that whatever your tactic, don’t forget to test, test, test!

Expiration Dates

There’s nothing that spurs conversion like a sense of urgency. Milk and eggs have expiration dates; so can your discount offers. With new customers, we recommend offering an extended discount window after they’ve signed up for email notifications. That way they’re still motivated to buy, even after they’ve made their first purchase, to take advantage of the discount. It’s important to test price points carefully, to avoid offering deeper discounts than are necessary or hurting the long-term value of each customer.

Product Selection

Try choosing one product or service to regularly discount as a way to convert new customers. This technique has worked particularly well in the services industry. A gym, for example, might offer a discounted bundle of personal training sessions only to new members. Restricting discounts to specific products or services can help you to maintain pricing on other offerings. For example, a jewelry retailer might offer new customers a discount on a related purchase, such as a matching bracelet for the earrings they just purchased. That approach has increased average order values for many of our clients, particularly when they follow up purchases with offers through other channels such as email, mobile or social.

VIP Programs

Providing special breaks to new customers is important, but you can’t ignore or neglect your best existing customers. Depending on your business, you might reward loyal customers for any number of behaviors, including on-time payments, referrals to new customers and consistent purchasing. At this point in the customer relationship, you want customers to earn their discounts rather than to take them for granted. Messaging your VIPs when they are close to a threshold for receiving awards will drive them to shop more often to reach their goal.

You can discount successfully without giving away the store or damaging your brand. Rigorous testing will help you sound out the best approaches. Next up: How to discount for existing customers.

Steve Wood, Optimization Analyst at Sailthru