How to navigate discounts as an ecom owner

How to navigate discounts, as an ecom owner:
Offering discounts can be a quick fix, like a high-end fashion webshop slashing prices on their designer dresses by 50% to gain sales. A customer unfamiliar with the brand might snag a dress, enticed by the incredible deal. While this achieves a sale, the approach has its nuances:

Pros:

1. A discounted first purchase could lead to recognition of your product’s quality, encouraging future full-priced purchases.

2. With effective communication, buyers might become brand loyal over time.

Cons:

1. Buying based on initial discounts is like choosing a partner based on looks alone. The connection might not be deep, leading to fleeting loyalty.

2. Customers lured by discounts might always expect one, diminishing the chance of full-priced purchases in the future.

Used over an extended period, particularly for specific business models (and brands), the cons might outweigh the pros. But, context is key. In situations where survival is at stake, such as imminent bankruptcy or immediate liquidity needs, businesses might opt for the short-term relief of a sale to increase cashflow. While aware of potential future repercussions, the immediate focus remains on weathering the storm. After all, longterm strategies can only be executed when you’re still in the game.

Actionable steps on navigating the temptation of discounts:

1. Determine your objective:
Before offering a discount, clearly define your objective. Are you aiming for brand recognition, liquidating old stock, or addressing immediate cash flow issues?

2. Limit frequency:
Avoid frequent discounts to ensure customers don’t start expecting them and undermine the value of your products or services (Unless you are a discount store).

3. Value addition:
Instead of straight discounts, consider bundling products or offering value-added services to maintain perceived value.

4. Educate customers:
With each discounted sale, communicate the actual value and benefits of your product. This will increase the chances of future full-priced purchases.

5. Loyalty programs:
Instead of frequent discounts, consider loyalty programs that reward repeat purchases or referrals, fostering long-term relationships with customers.

6. Feedback loop:
After offering a discount, get feedback from buyers. Understand why they made the purchase and if they see value in your product beyond the discounted price.

7. Evaluate financial impact:
Regularly assess the financial impact of your discount strategies. Are they increasing overall profitability or hurting your margins?

8. Emergency use only:
In situations where the business’s survival is at risk, consider discounts as a lastresort strategy to generate immediate cash flow. However, have a post-crisis plan in place to restore brand value and full-priced sales.

9. Quality assurance:
Ensure that the quality of products or services sold at a discount remains consistent. This can enhance the chances of conversion from discount buyers to regular customers.

10. Transparent communication:
Clearly communicate the reason for the discount. Whether it’s a seasonal sale, stock clearance, or special promotion, it helps in setting the right expectations with customers.

11. Set time limits:
If offering discounts, set a clear start and end date. This creates urgency and also assures customers that your product or service is not perpetually available at a reduced rate.

Best regards
Asger Olsson