DTC 378: Discounts 101

From the humblest mom-and-pop to the world’s largest retailers, discounts are a universally agreed-upon secret sauce to fueling business growth. 📈

Discounts serve as a magnet to attract new customers while simultaneously acting as a glue that keeps your existing ones sticking around.

In a world brimming with choices, a well-placed discount can be the nudge that turns a window shopper into a dedicated buyer. ⭐

Discounts and offers are a strategic tool in your business arsenal that, when implemented thoughtfully, can help clear out old inventory, drive customer loyalty, and trigger sales during slow periods. 

But before you slash the prices on your entire store, discounts can also have unwanted consequences:

  • Constant sales can lead customers to question the authenticity of your deals
  • Skepticism can deter impulse buyers from your brand, as they might assume another sale is just around the corner
  • Don't rely solely on discounts to earn your customers' loyalty. Quality should always be your top priority; customers often associate low prices with low quality

To master the art of discounting, let's dip our toes into some of the most popular ways businesses work their discount magic. 🪄

💲Percentage discounts

FOMO is real. 

And businesses know how to use it to their advantage—often through limited-time percentage discounts or sales. 🛒

Such discounts aren't just useful to tempt shoppers with attractive price drops; they're also a savvy way for businesses to sell older inventory. 

For example, companies like Asos frequently host "flash sales," where select items are discounted by up to 70% for a limited time. These sales give customers a reason to keep coming back to see what new deals they can score. 👍

💸 Cashback

On the other end of the discount spectrum, there are cashback incentives. When implemented well, these programs help customers associate their patronage of your business with direct personal benefits.

For example, rather than offering a direct $20 discount on their products, CrossNet shifted to a cashback strategy, allowing customers to redeem $20 cash-back post-purchase. 

It was a smashing success. 💥

Only 15% of the people redeemed their cashback! Their conversion rates increased, adding 600% to their bottom line, while they retained much of their margins. 💰

Even if more customers had redeemed, the fact that their average order value (AOV) is above $20 would have positively impacted their bottom line compared to offering a flat $20 discount.

Money aside, the cashback offer not only boosted their brand image (a cut-price deal can seem like a value reduction, whereas cashback feels like a 'thank you' to the customer), it also nudged customer loyalty. 

Cashback gives shoppers a reason to return and buy again. 🤝

🛒 Re-engagement and abandoned cart discounts

Let's be real: If you hear "I miss you" these days, it's probably from a brand in your email inbox. (Or you’re very into Blink-182!)

It might seem odd, but this messaging effectively draws customers back after purchasing or leaving something in their cart.

Check out this example of the organic skincare brand evanhealy’s abandoned cart strategy. 👀

If a customer fills up their cart but doesn't check out, the brand swings into action, sending an email reminder about the 'forgotten' cart with a special discount code used to track the efficacy of the email.

This approach works on two levels: it nudges customers to finalize a purchase they were on the fence about and keeps evanhealy top of mind. 

⬆️ Threshold discounts

At first glance, placing a discount behind a fixed-price threshold might seem like a tricky move. But guess what? Customers often willingly spend a bit more if it means they can access those sweet savings. 

Brands also often tie free shipping offers to a minimum purchase threshold. It stings less when shipping costs are covered for larger orders. 

Locally-owned dessert shop Valerie Confections used this strategy in an email campaign to keep their sales volume humming.

🙏 Loyalty, loyalty, loyalty

With rising customer acquisition costs, maintaining strong LTV (lifetime value) consumers is the lifeblood of any brand. 

Sure, having a solid lifetime value across your customer base is essential, but it doesn't fully encapsulate the influence a single loyal customer can have on your brand’s image. 

Beyond securing recurring revenue, strong customer loyalty births brand advocates who extend your reach through their personal networks and word of mouth.

So, how have deals and discounts shaped your customer base? We're all ears.

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