As customers, we all love discounts. Especially if we can purchase quality items or items that we like at a cheaper price. As business owners, we happily provide discounts to customers. This is because we think that customers will purchase more often, more items, will be satisfied with our business, and as a result, it will attract new customers.
While customers usually get all the benefits and no shortcomings from such offers, it’s more complicated for business owners. On the one hand, discounts are a great way to incentivize your customers to buy products and increase retention. On the other hand, without knowing more about your customers, applying discounts might hurt your business.
If discounts have both positive and negative effects, then the question is, what can you do to maximize the benefits and avoid the disadvantages.
Set your strategy and tactics
If you are thinking about offering discounts to your customers, it is crucial to have a strategy beforehand. Usually, eCommerce businesses offer discounts when they want to increase conversion rate. Discounts can also help to increase sales, increase customer retention, onboard new customers, promote new products, empty old stock or unsold products.
When you set up your eCommerce discount pricing strategy, you then have to define a discount tactic that will be used to achieve the desired goal.
For example, if you want to increase your brand awareness, you can apply a discount tactic that rewards customers who share your products on social media.
However, if you want to increase your customer loyalty, then it might be best to offer discounts to all customers who sign up or are active members of the loyalty program.
Or maybe your goal is to increase customer retention rate. In that case, the discounts should be applied in a way that encourages returning customers to buy again. You can then use discount tactics where you reward your loyal customers and introduce a referral program.
The point is that setting up strategies and tactics is extremely important before applying discounts to your items. Businesses that run sales campaigns with no defined strategy can hurt their brand value and decrease profits.
Target your offers to customers
One of the worst discounting mistakes an eCommerce business can make is not to target its offers. However, targeting your offers is not enough. 57% of eCommerce businesses are targeting inaccurately or targeting wrong customers. Picture this scenario: you buy an item, and a couple of days later, the same eShop sends you a discount code for the same thing you purchased. Your views about that eShop would probably diminish very quickly, and it would be tough for that brand to restore your trust.
That is why you need to target your discount offers to people based on the information you have about them, as activity on your website, purchase history, and more. If you are promoting discounts for certain products, make sure that you don’t accidentally send such a promotion to people who already purchased the same product.
Verfacto takes this approach further than just analyzing the purchase history. It considers specific behavioral patterns of visitors to predict how likely they are to buy at full price. If a user is likely to buy without a discount, there is no point in lowering your margin by offering a lower price. On the other hand, “value-buyers” hunt for the best deals, so a discount would likely lure them.
Track and measure metrics
Another huge mistake a business can make when running sales campaigns is ignoring the metrics associated with the discounted products or services. A successful discount pricing strategy requires an in-depth analysis of collected data. That cannot be done without tracking and measuring relevant metrics.
Discounting metrics are data points that show the performance of discounted products or services during a set period. Track and measure the discounting metrics to determine whether strategies or tactics are effective.
Discounting metrics that you have to track depend on your discount strategy. The most commonly collected information include:
- Sales and Profit. Sometimes sales promotions increase sales but lower profit. That’s why profit should be tracked to see how the campaign performs.
- Sales Volume. To accurately measure the increase in sales volume, you will have to use data collected before and during sales campaigns. So that you could compare performance of the same items before and after they were discounted.
- Customer Satisfaction. This metric is used to measure how satisfied customers are with your discounts and products. It’s especially useful to collect this type of data to understand your customer loyalty better.
- Goals Measurement. To take full advantage of the set goals for discounts, always measure them. If you have accurate measurements of different types of factors, you will have an excellent opportunity to identify and improve in areas that you possibly lacked in.
All these tasks can be daunting: they require a lot of time, skills, preparation, and other resources. Modern software solutions can make things a lot faster and easier. Verfacto analyzes complete customer journeys through customer segments and can predict whether it’s worth running sales campaigns and to what extent.
Reminder for eCommerce businesses
Sales campaigns and discounts are a vital part of running an eCommerce business today. That’s why it’s essential to make discounts as effective as possible to successfully increase sales, customer retention and loyalty or achieve any other goal you have in mind. Discounts that are misused might hurt your eCommerce business and cost you a lot of money. That is why it’s best to be prepared to avoid any mistakes. Or at least not make them twice.
And remember, you can always make your sales and discounts targeted and effective if you use your data correctly. Your journey into data-driven marketing starts right here, at Verfacto. Try it for free and never get back to outdated, ineffective techniques.