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How Discounts Can Help or Hurt your Business

How Discounts Can Help or Hurt your Business

Every brand offers sales and discounts at some point.  When you’re considering whether to run a sale, there are many factors to weigh. Below are some ways discounts can help and some ways discounts can hurt your business.  Keep these in mind next time you contemplate running a sale to be sure you make the best decision.  

Ways Discounts Can Help 

 

Bring in New Customers 

A discount is a great way to convince a potential customer who was on the fence about purchasing to finally purchase. A lower price point means less of a potential loss for the new customer in case they do not end up liking the product or service.  Specifically target those who have visited your website, or those who have left something in the cart, with an exclusive discount.  If the discount is widely utilized, it can bring in many new customers for your business.

Bring old customers back 

Sales and discounts can also encourage repeat purchases.  If you notice your business is not retaining customers very well, one way to try to win some of these customers back is with a coupon.  Chances are, you have some customers who enjoyed the product or service they bought from you, but just did not want to pay to purchase again.  A discount can help hook these people in and hopefully entice them to continue their purchasing behavior with you in the future as well.

Limited time offers foster urgency 

Discounts can also help your business by causing an immediate jump in sales.  If there is a time you are short on cash, struggling a bit, or have excess inventory you need to get rid of to make room for new offerings, a sale is a great way to help your business out.  When a sale is only running for a limited time, customers feel the urgency to purchase before the discount pricing disappears.  This can encourage people to stock up or to repurchase sooner than they were planning to, both of which boost your sales quickly and immediately. 

Ways Discounts Can Hurt 

 

Devalue product 

On the flip side, discounts can also be harmful to your brand in certain situations.  Steep discounts can devalue your product, and make it feel cheap.  This is especially true for luxury or high-end products and services.  Remember that you chose the selling price of your offering for a reason.  Be careful not to offer discounts that are too steep and take value away from your product or service.

Lose out on revenue 

When weighing the pros and cons of running a sale, this is a pretty obvious downfall.  Selling items at a discounted price decreases your margins and the revenue you are making off of each product.  Oftentimes, the boost in sales and other benefits the discount provides outweigh this concern.  But be sure to consider the margins and the money you will be bringing in by offering a discount, and make sure it will not harm your business to sell at the lower price.

Frequent discounts can discourage customers from paying full price 

One final risk of offering discounts is that customers can become accustomed to sale prices and stop shopping your offerings at full price.  This risk is especially salient for brands that run sales frequently.  If customers can expect to see items marked down on a regular basis, they may withhold purchases any time items are at full price.  As long as the discounts you offer are few and far between though, this should not be a major concern.

Overall, discounts can be very effective at boosting sales when they are at the optimal level and are directed at the right demographic.  However, there are some pros and cons to offering discounted prices on your products.  Each business has different needs and concerns when it comes to discounts, and these needs can change situationally as well.  Do not just fall back on a sale or discount as your only go-to marketing move.  Be sure to look critically at the potential positive and negative aspects to make the best possible decisions as far as discounts go.  

Discounts are just one of many ways you can try to optimize your company’s Ecommerce.  Be sure to check out some of our other tips for improving your Ecommerce store as well.

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