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Discount pricing strategies and when to use them


8 discount pricing strategies that won't kill your profits

This post was last updated on February 13, 2024.


In this post, we’ll help you to solve the riddle behind eCommerce discount strategies. Learn how to craft a discount strategy that benefits your business without cutting too deeply into your bottom line.


There’s no denying that a great discount can do wonders for conversions.


But if your discounts are too generous, too frequent, or too broad, you risk losing money—and even attracting a different crowd (e.g., deal seekers) than you originally intended. On the flip side, if you’re overly stingy with discounts, you may find that sales are few and far between.





What is a discount pricing strategy in retail?


A discount pricing strategy is a deliberate decision to sell a product or service at a lower price than the listed or advertised price.



Discounts can be temporary (for new items) or permanent (for clearance products).

They can also take different forms (e.g., percentage off vs. free shipping). We'll get into specific pricing strategies in a minute, but first, let’s discuss a few different scenarios that are appropriate for offering discount pricing.


When should you offer a discount?



You want to motivate new customers to make a purchase


Discounts not only draw attention to your site—they can also entice customers who are unfamiliar with your brand to follow through with their first purchase. Discounting is particularly helpful if you’re selling in a crowded market or if you’re a new eCommerce small business owner with a newly minted online store.



You want to boost shopper engagement and improve customer loyalty


A competitive discount pricing strategy can be useful for incentivizing repeat purchases or organic marketing. For example, you might offer a discount as a reward when customers refer their friends and family to your brand. Or, you might choose to launch a loyalty program that offers gifts, discounts, and other incentives based on how much and how often members buy from you.



You want to clear out old inventory


If you’re looking to clear out inventory that’s taking up space in your store or warehouse, a discount can improve inventory turnover and help you make room for new products.



You want to increase sales when demand is high


Discounts can give you an edge during the holidays and other hyper-competitive selling events, like Prime Day. These types of events tend to have a “halo effect,” whereby the excitement caused by these promotions have positive ripple effects on other retailers (read: you may see a nice bump in traffic and sales even if you have no direct ties to the event).


Discounts can additionally be useful in the weeks following these periods. For instance, a retailer that sells candles might offer discounts on holiday-scented candles after the holidays have passed, or a sporting goods store might offer coupons at the end of the regular sports season.



4 key considerations behind any discount strategy


There is no one right way to set discount prices. Your strategy should be tied to your business goals and the types of products you sell. That said, there are some general guidelines that you can use when planning for a discount.



01. The timing


When does demand for your product peak and drop? Or, when do people tend to drop off during the buying process? Think about when customers are mostly likely to seek out discounts, or how you can use discounts to close the sale. Look at historical sales data for clues and peek at how your competitors are using discounts to their advantage. If you've just started a business, it might take time to collect this data so don't rush ahead with a discount strategy until you have this information.



02. The messaging


The way you present a discount may or may not motivate a sale. Jonah Berger, author and marketing professor at Wharton, advises retailers to use The Rule of 100 when advertising a discount.


“Subtle ways of framing the same information can make consumers more compelled to purchase,” writes Berger.


For instance, let's say the list price of a candle is $30, but the discounted price is $22.5. The discount can be presented as either “$7.50 off” the list price or “25% off.” The Rule of 100 says that the percentage is more enticing to consumers than the fixed amount. This remains the case until the listed price of an item exceeds $100.


A discount for higher ticket items, like a smartphone, is typically more compelling when it’s presented as a fixed fee. For example, if the sale price of an $850 phone is $595, you should present the discount in a dollar amount rather than a percentage, so $255 off and not 30% off. In both cases the customer will pay $595 for the phone, but they're much more likely to act on the discount when the deal is presented in absolute dollars saved.



03. The product


The type of product you’re selling should also inform your discount strategy. If you’re trying to build a luxury brand, avoid deep discounts that could devalue your brand or the product itself.


On the other hand, if you are reselling a popular item, you might need to offer a steeper discount to stay competitive and make it worth it to shoppers to buy from your store versus a vendor they’re more familiar with. Just make sure that you’re not breaching any MAP policies when you do so.



04. Your costs


Take into account the costs of manufacturing, shipping, and packaging your product (among other related expenses). It’s alarmingly easy to lose track of costs and lose too much money on a promotion—a problem that 20% to 30% retailers face, according to a study by the Boston Consulting Group.


According to the same study, 20% to 50% of promotions don't actually generate a noticeable lift in sales. But retailers hesitate to scale back on these campaigns because they’re not sure which ones are working and which ones are not.



8 types of discount pricing (with examples)


Granted that you’ve done your homework, discounts can be instrumental in attracting new customers or delighting existing ones. Here are eight types of discount strategies that you can bake into your eCommerce marketing strategy.



01. Quantity discount


Offer a discount when customers purchase certain quantities of your product. For example, you could offer multipacks, run buy-one-get-one (BOGO) promotions, or offer special pricing for bulk orders. The goal is to motivate customers to purchase more products than they'd originally intended.


It's the “five for $25” approach that retailers like Victoria Secret and Urban Outfitters use when selling relatively low-priced items. Or, as shown in the example below, Wix merchant Coal and Canary incentivizes larger basket sizes by setting a minimum order requirement.



quantity discount offered by Coal and Canary


02. Price breaks


A volume price break is similar to a quantity discount, but applies to a broader range of order sizes.


For example, you may require customers to purchase at least 10 items to get a 10% discount off the total order price. However, they can still get a 5% discount if they buy eight items. Each of these checkpoints come with its own price break.



03. Bundle pricing


Bundling different but related products together can increase average order value (AOV), while reducing the per-unit price of one or more items within the bundle. Bundles double-up as a great strategy for promoting gifting, especially during the holidays.


For example, if you own a beauty brand, you could create a "spring nail" package that bundles several pastel-colored nail polish with nail-care tools.


Alternatively, you could create "starter bundles" or bundles that feature products from the same collection. Take a look at this plastic-free utensil set offered by MightyNest, an eco-friendly retailer.



bundle pricing offered by MightyNest


MightyNest offers additional discounts to customers who are part of their loyalty program—which leads us to the next discounting strategy, stackable discounts.



04. Stackable discounts


There are multiple ways to offer stackable discounts, all of which can motivate buyers to break out their credit card and complete their purchases. As with the MightyNest example above, you can offer bundles and multipacks as part of your catalog, and allow loyal customers to exercise additional benefits at checkout (e.g., in this case, MightyNest members get free shipping and an additional 15% off their purchase).


Another approach is to offer free shipping contingent upon a minimum order amount (e.g., free shipping for orders over $50). Or, let customers apply rewards, coupons, or credits to discounted items at checkout.


A stacking discount strategy can help you achieve multiple goals, including (but not limited to) increasing AOV, improving loyalty, and encouraging repeat purchases.



05. Flash sales and lightning deals


A flash sale is a discount offered for a limited time.

This type of discount encourages impulse buying. It can be the final push that customers need to hit “buy” when they’re on the fence.


Examples of flash sales include special promotions when a new product first launches, or a 24-hour discount on a hot-selling item.


A lightning deal is like a flash sale on steroids. Lightning deals offer heavily discounted prices on a single product for an extremely short time (think: Amazon Lightning deals).


They’re an effective way to drive sales when traffic is slow or when you’re trying to clear out inventory—without committing to long-term sales.


However, you’ll want to make sure you set aside enough stock to meet customer demand, otherwise your sale could backfire and cause you to oversell. This, in turn, could leave a bad taste in customers’ mouths.



06. Loyalty discounts


This type of discount is often offered as a reward for repeat purchases or membership in a loyalty program. For example, you might offer 10% off to customers who have purchased from your store three or more times within the past year.


Or, you could offer free shipping to newsletter subscribers or members of your VIP club, a strategy that Wix merchant Vivi et Margot employs.



loyalty discount offered by Vivi et Margot


Loyalty discounts can also be awarded to customers who refer friends and family to your store (e.g., earn $10 off your next purchase for referring a friend).



07. New customer discount


A new customer discount is offered to first-time buyers to get them to take a chance on your brand and/or return for a future purchase. For instance, you might offer 10% off a shopper's first order or include a free “welcome” gift for new customers.

As with any special offer, you’ll want to make sure that your offer is clearly communicated and easy to redeem so that customers walk away with a good impression of your brand.



08. Personalized discounts


A personalized discount is a discount that's tailored to the individual shopper based on his or her purchase history, browsing behavior, or other triggers. For example, you could offer a 10% discount to shoppers who visit your site frequently or have searched for specific items.


Personalized discounts can additionally be used to encourage certain behaviors, such as completing a purchase within 24 hours of adding an item to the cart.



Pros and cons of discount pricing


When developing a discount pricing strategy, there are a number of factors to take into consideration. Make sure you have thought of these pros and cons before you implement your pricing strategy:



Pros of discount pricing:


Learning how to craft the proper discount strategy for you is key. If you do it right, there are a number of benefits for your business:


  • Increase sales. Discount pricing can be a great way to increase sales, especially for new products or products that are not selling well.

  • Attract new customers and boost brand awareness. Discount pricing can be a great way to attract new customers who may not have otherwise considered your products and help to boost brand awareness by making your products more visible to potential customers.

  • Clear out inventory. If your warehouse is cluttered with old inventory, discount pricing is a great strategy to clear it out.

Cons of discount pricing:


Getting carried away with discount pricing is where businesses sometimes go wrong. The downsides for your business include:


  • Reduced profit margins. Discount pricing can reduce your profit margins, especially if you offer deep discounts.

  • Damage brand image. If you offer discounts too often, your customers may start to think that your products are always on sale, which can damage your brand image.

  • Can attract bargain hunters. Discount pricing can attract bargain hunters who are only interested in getting a good deal, and they may not be repeat customers.



Manage discounts with Wix eCommerce


Clearly, there are many discount pricing strategies that you can use to drive sales on your site.


Whether you choose to offer flash sales, loyalty discounts, or new customer offers, be sure to carefully track your results and analyze which strategies work best for your brand. By experimenting with different offers and promotions, you can find the winning combination that boosts your bottom line.


If you're looking for an easy way to manage coupons, pricing strategies, loyalty programs, and more—check out Wix’s full suite of eCommerce features. Get the tools you need to bring your ideas to life and stay in control of your orders, inventory, and more.



Discount pricing strategies FAQ


What is a random discount pricing strategy?

A random discount pricing strategy involves offering periodic, unpredictable discounts on products or services. Unlike regular sales or promotions, the timing and extent of discounts are not predetermined, creating an element of surprise for customers. This strategy aims to maintain customer interest, encourage spontaneous purchases and foster a sense of urgency. While it may enhance customer engagement, careful implementation is required to prevent potential negative impacts on brand perception and profit margins.

What is a deep discount pricing strategy?

Marketing and discount pricing strategies

What's a popular discount pricing strategy example?



Allison Lee

Allison Lee

Editor, Wix eCommerce

Allison is the editor for the Wix eCommerce blog, with several years of experience reporting on eCommerce news, strategies, and founder stories.

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