The Ultimate Guide on Ecommerce Discount Pricing Strategies and How to Do Them Right

The humble discount has been a commercial staple for years and in the eCommerce age, it’s no different. Discount pricing remains an effective tool that eCommerce can employ to boost sales and drive engagement

Discount pricing isn’t just about slapping a red sale sticker on a product. The art of eCommerce discounting requires careful planning. Throughout this article, we’re going to walk you through some of the most effective eCommerce discount pricing strategies that are guaranteed to get your sales soaring. 

What is an eCommerce discount pricing strategy?

Simply put, an eCommerce discount is the online version of an in-store “sale” or promotion. Discount pricing is used by e-commerce brands as a way to boost sales. By lowering prices or offering promotional deals, customers are more likely to make purchases. There are tons of different ways that brands apply discount pricing to their marketplaces (but more on this later). 

The discount pricing strategy refers to the “why” and the “how” behind the discount. You’ll want to develop a discounting strategy that serves your unique business aims. For example, that might be offload slow-moving stock or to try and generate higher levels of customer retention. Every e-commerce brand’s strategy will vary depending on what they are trying to achieve.

Why (and how) discounting works 

Discounts are a tried and tested way of increasing sales and preventing cart abandonment. But how does it actually work?

Well, it has a lot to do with human psychology. 

When a discount is applied to a consumer good, product, or service, it creates something called an anchoring bias. Anchoring bias is a phenomenon that works by emphasizing the contrast between an original price point and a reduced price point.

Take Black Friday as the prime example of this. Why do shoppers flock to stores and online marketplaces on this particular day each year? For those big-money savings right? The entire premise of this day is well and truly rooted in anchoring bias. 

It “anchors” shoppers to the original (higher) price and, in so doing, generates perceived value to be gained by purchasing the discounted product. Customers enjoy the satisfaction of getting something for less and brands enjoy an uptake in sales as a result. Offers and discounts are also proven to push new customers towards making that first purchase. 

The benefits of discount pricing for ecommerce

We’ve already mentioned how discount pricing done right can be great news for eCommerce sales. But as well as increased conversions, an effective discount pricing strategy can bring a whole host of other benefits. Let’s take a look at these in a bit more detail. 

Increased conversions

As we’ve mentioned, one of the key reasons for applying discounts is to increase online conversions. When customers see offers, discounts, sales, promotions (however you want to phrase it), they see savings. The promise of a deal is tempting enough to get more shoppers to convert. 

Customer acquisition goes up

Another positive side-effect that comes with discounting is acquisition. As prices drop, more customers get on board. Flash sales and offers are a highly effective way to attract new customers to your brand and to get those first sales rolling in (and you might just pick up some long-term, loyal, customers in the process). 

Boost customer retention

Discounts aren’t just a way to catch the attention of the newbies. Personalized, targeted discounts offer brands a way to nurture and reward their most loyal customers. Offering unique discounts to existing customers will make them feel valued and encourage repeat purchases. 

Balance out the losses

Sometimes brands will put products on sale that are proving hard to shift. Perhaps a particular item is taking up too much space in the warehouse and just needs to be gone. This is very common. Placing these products on sale means customers can bag a deal and you can balance out any potential losses that would otherwise be incurred as a result of all that dead stock. 

Ecommerce discount pricing strategies explained 

Now, let’s get down to the nitty-gritty. You came here for strategies and that’s exactly what we’re going to give you in just a moment. 

You’ll need to pick a strategy that works for you, taking into account why you want to launch a promotion and what you want to achieve as a result. 

There are so many options to choose from, from revenue-driving discount codes and coupons (ideal to boost acquisitions and conversions) to referral discounts (great for encouraging customer loyalty). So, let’s take a look at some of the best eCommerce discount pricing strategies in more detail below.  

1. Discount codes & coupons

Discount codes (or coupon codes) allow consumers to access exclusive offers. Discount codes can be marketed in lots of different ways to build excitement around a particular product or range of products. For example, customers might be asked to use their discount code to unlock a percentage discount off all products in-store. 

Alternatively, the discount code might unlock buy-one-get-one-free deals or fixed value reductions. Limiting the time during which codes are redeemable is a fantastic way to generate excitement and rush around your promotion. Ecommerce platforms regularly use discount codes as a way to increase average order values

2. Automatic discounts 

Automatic discounts are applied at the checkout when customers add eligible products to their shopping carts. For example, customers might qualify for a discount if they buy particular items or they might receive a free promotional gift. 

Automatic discounting is an increasingly popular strategy, largely due to the fact that it bypasses any need for customers to enter codes or coupons at the checkout. 

3. Personalized discounts

Personalized, customer-focussed discounts are designed to encourage specific buying behaviors amongst target consumer groups. These are highly targeted discount strategies that require brands to analyze consumer patterns and implement discount-based strategies to either encourage (or discourage) said behaviors.

Examples of personalized discounting strategies include:

  • Cart abandonment discounts
  • New customer discounts
  • Discounts for referrals 
  • Subscription discounts
  • Membership discounts
  • Exit intent popup discounts
  • Quantity-based discounts 

4. Get to grips with your key metrics

Finally, make sure that you’re consistently monitoring your campaigns. Identify some key performance metrics and KPIs that will help you measure the success of your discount strategy in real-time. By taking a data-driven approach you’ll be able to identify any areas for improvement and make the necessary fixes asap! 

Product-specific discounts

Product-specific discounts refer to price reductions or offers placed on a particular stock. This is typically the discount strategy of choice for eCommerce stores struggling with excess or slow-moving inventory in the warehouse, although this type of discount can be equally effective as a way to generate buzz around a new product release.

Examples of product-specific discounting strategies include:

  • Product in decline discounts
  • New product release discounts 
  • Stock clearance sales
  • Flash sales
  • Buy-one-get-one-free (BOGOF) deals 

Tips for developing an effective discount pricing strategy 

Now that we’re more familiar with the styles of discounting strategies out there for eCommerce platforms, let’s have a think about how to implement them. Offers need to be well-defined and rooted in a clear objective. Before launching your discount campaign, take a step back and consider the following best practices. 

Be goal-oriented

Start with a plan. Ask yourself what you’re trying to achieve via your promotion. Discounts should always have a clear intention. That could be to onboard new clients, reduce cart abandonment, or boost customer referrals and start turning customers into life-long brand advocates

Define & segment your customers

Once you’ve defined your goal, home in on your target customers. Who is this offer for? At this point, you might also choose to segment your pool of customers into smaller groups and direct more personalized promotions to each according to their individual behaviors, engagement levels, and shopping habits. 

Optimize timing 

Next, think about the timing of your campaign. This is super important if you want to maximize the impact of your promotion. Seasonal promotions are a great shout and help brands engage customers and get them excited for one-off savings.

Running your campaign for a set duration of time is a great way to generate a sense of urgency. Got a lot of dead stock to shift? Why not try a flash sale that times out after 48 hours? 

Make your offer known and set clear terms 

Even the most fantastic offers can be a flop if they aren’t marketed well. For people to get excited about discounts and promotions, they have to know about them first. Again think about how successful Black Friday has become. 

Why? Because the hype around it is, quite literally, insane!

Make your offer known in advance on as many channels and platforms as possible. Use your contact center to start an outbound calling campaign to promote your upcoming promotions. 

Automating your outbound comms is another element that will influence your ability as a company to increase your bottom line. While many companies are still asking “what is predictive dialing”? Your business could have the jump on other industry movers with such tech in place. 

Finally, ensure that the terms and conditions of your promotion are explicit to avoid unnecessary confusion. It should be straightforward for customers to identify who the offer applies to, what the offer consists of, and when the discount is applicable. 

Pick your discount strategy

Whatever discount strategy you choose, make sure it’s targeted, intentional, and measurable. Discounts allow eCommerce businesses to quickly shift stock, build engagement and onboard new customers for the long haul. All that’s left is to pick your discount strategy! 

About the Author:

Richard Conn is the Senior Director for Demand Generation at 8×8, a leading communication platform according to 8×8 consumer reviews with integrated contact center, voice, video, and chat functionality. Richard is an analytical & results-driven digital marketing leader with a track record of achieving major ROI improvements in fast-paced, competitive B2B environments. Here is his LinkedIn.