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Think Carefully Before You Promote That Ecommerce Discount

30 Jun 2016

Everybody says they love a bargain, but when it comes to selling products in your ecommerce store, that bargain may wind up doing more damage to your business than you intended.

Before you discount stock ask yourself why you're doing it? For growth? To gain new customers? To increase loyalty or reward customers? To clear out old stock?

Discounting to grow...

This is often a pattern that new ecommerce businesses get into. 'I need more customers in order to grow, so I'll offer cheaper prices to attract them.'

The problem is that each discount you offer lowers your profit. So in order to make more money, you need to sell more, which means working harder and spending more on marketing and advertising. And invariably your marketing material is going to focus on your cheaper prices thinking that is going to appeal to more customers...

Appealing to more customers...

61% of customers are average spenders, meaning that they're not necessarily initially motivated by the cheapest price. These customers tend to have a 'you get what you pay for' mind-set, so if they see a cheap offer that are either going to be thinking that the quality is low, or that you don't believe in your own product's worth (and how are you supposed to convince any one to purchase from your ecommerce store if that's the case!).

Low prices tend to attract the penny pinchers which make up approximately 15% of the customer pool. Without generalising, these customers tend to be demanding, have unrealistic expectations of what your product will do and the levels of service they'll get, have no loyalty (they'll abandon you for a cheaper price every time), and often take a lot of your customer services time up by asking a lot of questions and more often than not, not actually ever committing to the sale.

It is highly unlikely that you can sell a high quality product at a discount price and create a long-term viable, stable business (unless you have magical powers!). So do yourself a favour and avoid the penny pinchers by focusing on the solutions your products provide (it can help kids excel at school in 3 easy steps, it easily cleans even the dirtiest oven with 1 single spray, it increases the shelf life of fruit by 4 weeks) and the added extras (100% money back guarantee, free shipping, bonus how-to video) that purchasing from your ecommerce store offers your customers.

In other words, give your customers a reason to purchase from you specifically, one that's harder for your competition to replicate. Because let's face it, any one can be beaten on price...

Discounting the right way

The good news is there are a ton of great ways to still hold ecommerce sales without negatively impacting on your business.

Offer discounts on stock that you want to clear out (because it's out of season or you're no longer stocking that range) - just make sure that you move items into a 'clearance' category and make it clear to your customers why the items are discounted; i.e. it's a one-off clearance, not to be repeated prices, when they're gone they're gone!

Offer introductory prices - if you're stocking a new item or range and want to test the market, feel free to offer a discounted price for a limited time. Make sure that it's clear when the cut-off date and time is and what the higher standard price is going to be.

Use specials wisely - rather than discounting your entire catalogue, discount 'second tier items' - these are the items which sell okay, but aren't your best sellers. Offering a limited time promotional discount (make sure the cut-off date and time is clear) as a way of introducing these items to more people can work well. You'll still be bulking out your profit with your best sellers, so this should help to balance the books.

Offer bundle deals - look for opportunities where you can combine sets of items into a more enticing purchase (for instance a 'winter essentials package' of a hat, scarf and gloves). By spreading out the discount over multiple items you're losing less profit overall.

Pay attention to what you're discounting - there's nothing worse that purchasing something only to find out that the store has a sale on it two days later! Consider using your order history data to contact customers who have purchased those items within the last few days or so with an email 'hey we noticed that you've just purchased an item which went on sale a couple of days after you purchased yours, so you don't feel bad here's a voucher for free shipping (or 10% off, or a free gift worth $15) with your next order.' Think of it as a way to increase customer satisfaction and potentially gain more orders (and repeat customers!).

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