I’m no fan of straight out discounting. The scenario where you throw up a popup and ask for an email address in exchange for a 10% discount code.
There are multiple reasons:
- you’re putting price top of mind for your customer
- 10% may not seem a big deal when you’re selling a product < £100
- your visitor hasn’t had time to get comfy learning about your own brand/products
- it makes selling at full price a whole lot more difficult when you focus on repeat business
Discounting is a strategic sales process. One used to close the deal rather than open the conversation. Think offline (the real world).
I understand why you use coupons as a means of value exchange… eg, to earn the right to email a potential customer. Done correctly, you can see upwards of 10% of site visitors handing over their prized gmail address.
The problem with the email for discount exchange
I’m rarely seeing ecommerce brands do enough with the email address they’ve now earned.
Welcome sequenced are used as a mere prod to alert subscribers that they ‘still haven’t used’ their discount code.
Even worse, those customers who do hand over their email address are simply added to the weekly newsletter – often a listing of discounted products.
What should you be doing instead?
If your business model is built to allow for the 10% discounting model, why not just present the code in the first place? Opening up your discounting opportunity to all rather than those that register for your emails?
If you’re doing very little to nurture, educate or make that new subscriber feel at home with your brand, why place an obstacle in the path by requested they subscribe in the first place? Just pop that promo bar live with the continuous 10% flash sale?
Ecommerce marketers are rarely clear in terms of the impact of discounting or are doing very little to investigate what discounting strategy is the most effective.
For many, using the discount code has become a lethargic attempt at persuasive marketing. An ‘easy’ win that requires little or no effort.
An alternative to discount code use?
The 10% discount code to the 7-figure business is a 6-figure giveaway. That’s a lot of dosh we may be handed over to your customers needlessly. And on top of that the ad costs (retargeting as one example) and tech costs in order to push and present the discount code.
I’ll keep adding the caveat that some ecommerce brands (a minority) are built to incorporate the discount code as part of their ongoing customer acquisition efforts. They’ve established welcome flows, use timed or behaviour-triggered campaigns and are making full use of a/b testing scenarios to make profitable gains through the use of strategic discounting. I rarely see this as the case.
If, on the other hand, you’re using a popup to capture an email address and doing nothing to improve that potential customer’s shopping experience you could be killing conversion rate. How? By not offering that discount code straightaway.
In fact you can go one step further.
Using Automated Discounts for Shopify stores
For shopify store owners you have the opportunity to add discounts without the need for coupon codes.
Discount codes that can be automatically activated in the following roles:
- 10% discount when a customer is spending £100 or more
- £10 discount when a customer spends £100 or more
- Free product worth £10 when a customer spends £100 or more
And these discounts can be applied specifically to products, product categories or across your site (you’ll see greater conversion rates when the discount is set specific to product categories)
Imagine the feeling. Your customer lands on a particular product and … as luck would have it… there’s a flash sale on that product right now. What a great feeling! … must buy now…
Don’t get hooked on discounting
You have to get smarter with how you approach the use of discounting. Discounting isn’t for everyone, conversely, it’ll be easy for me to sit here telling you to stop discounting. But, you have targets to hit, bills to pay, cash to flow…
This is what I’m seeing right now (without any form of scientific basis):
- 40% ecommerce brands not using discounting
- 50% ecommerce brands using discounting poorly
- 10% ecommerce brands using strategic discounting and profiting
I don’t want you making up the numbers in that majority of 60%. Just because the chap on the podcast, or the article you read, was talking about ‘killing it’ through an exit-intent popup on their site doesn’t mean that approach will work for you.
Because if that 10% discount code doesn’t appear to be working, what’s next? Yep, let’s move on to the 20% discount code. That’s surely going to work, right?! Wrong. And it is a dangerous path to head down. You’re in the business of making money, not giving the stuff away.
Don’t assume that an increase in revenue is a good thing
You’re in the business of making money. It’s great to see an increase in revenue, I get that, but stripping out profits in order to up conversion rates is crazy business.
Lowering AOVs is a dangerous game too. More customers (there’s a marked difference between a discount-hungry customer and a brand believer) means more customers to service, more products lost-in-transit, more refunds to run, more questions to answer… more time to commit. I know, I’ve been there, it’s not pretty seeing the increase returns and refunds. It hurts financially and mentally.
What to do next?
Take a look at the financials of your use of discount codes. See how many of your customers are using them. Learn how many people buy on the back of your welcome sequences. Arm your store with knowledge.
For stores with healthy levels of traffic (1000+ visitors) then you now need to plot how you can learn which (if any) discounting methods bring in the profits.
- do you use automated discounting?
- do you improve your welcome sequences to increase the success of codes?
- do you stick to your guns and focus on quality of marketing over depth of discounting?
One things for sure, to maximise profit, you can’t simply sit there and work with the default.
What I have learned through a/b testing and strategic discounting is that paying attention to associating the discount to the preferred product wins. Making your customer believe that it’s an almost serendipitous moment when they see a discount against their preferred product pays dividends over the blank ‘come get your discount’ policy.
What’s hugely important is the impact first-purchase discounting has on future purchases. Betting heavy on winning a new customer requires you to significantly up your marketing game in order to win the repeat business of that customer (without the use of heavy discounts). Offering straight up 10% or 20% codes on that first purchase creates expectation (and assumption) on what persuades your customer to shop again.
Work the upsell
Where I’m seeing greatest success with clients right now is in the upsell. Buy one product, receive a discount on another. It’s a great way to increase AOV and due to the specific nature of the promotion, doesn’t set direct expectations for a discount for future purchase.
you can bundle products using an app such as Bold Bundles – Product Bundles that costs less than $20 a month. This works great for fashion and lifestyle brands. You can curate product bundles seasonally as a way to push slow-moving stock or to introduce categories that your customer may not have considered (until now).
You can also create multi-buys and reward customers that purchase 2 or more of a particular product or category (great when you consider customers may be stuck deciding between to colours or variations)
Just because you see others throwing codes around needlessly does not mean that they’re profiting. They’re just following what has now become the default in ecommerce.
I’ve built ecommerce brands for 20+ years with email marketing at the very core of profit-focused marketing. It doesn’t mean that you have to use discounting as a ploy to grow subscriber lists. Don’t kid yourself that the size of a subscriber list some how correlates to the revenue you can (or will) drive from that list.
You are in the business of profitable growth first and foremost.
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