Don’t you think discount pricing and e-Commerce both are connected? It’s because nowadays e-commerce platforms like Shopify are fully dependent on discount pricing to boost their revenue through difficult economic times or to drive conversions. That’s why, the role of discount pricing in eCommerce is important for both store owners and customers.
Discount pricing needs constant balancing to maintain profit margins and customers’ expectations. That’s why store owners also need a proper discount pricing strategy.
According to a recent McKinsey & Co. survey, 40% of consumers are more mindful of where they spend their money, and 32% say they are moving to less expensive brands and products to save money.
We’ll explore everything you need to know about discount pricing so that you can decide for yourself whether it fits with your brand. We will also discuss all the possible discount pricing strategies, how they affect customers’ psychology, and how to improve customer loyalty.
In this writing, you’ll learn what discount pricing is, look at several efficient discount pricing techniques for e-commerce businesses, the pros and cons of discount pricing, and show some examples of discount pricing in action.
Let’s begin.
Discount pricing is the ultimate pricing strategy for businesses. They reduce a certain amount of money or percentage on some products or specific product bundles.
There are various types of discount pricing in e-commerce available, such as quantity discounts, variants fixed prices, and BOGO (buy one get one) offers.
Discount pricing has several impacts on a store’s revenue. Both positive and negative. When a store owner offers a discount once in a while, it helps boost sales. On the other hand, if a merchant constantly offers discounts, it devalues their products to customers and impacts them negatively.
Discount pricing is not a usual thing for businesses or stores. When a store needs to sell the remaining products and stock new items to their inventory, they need to sell the existing products and create urgency.
For example, a Shopify store owner might offer 20% off during a holiday sale, provide a bulk discount for buying multiple items, or offer discounts to reward loyal customers by choosing specific customer IDs.
These strategies lead to different goals, such as increasing the average order value (AOV), reducing unsold stock, or creating a competitive edge in the market. Also, effectively impacts customer’s psychology and encourages them to purchase higher volumes.
There are so many examples of the role of discount pricing in e-commerce. Discount pricing is often mixed with other marketing campaigns.
When you buy certain point items, store owners combine to give you even more rewards or a percentage of money off. By giving rewards, they can introduce their new stock items or increase engagement.
The following examples show how discount pricing plays a role in eCommerce. Besides Shopify, there are Amazon, Ikea, Alibaba, and many other e-commerce platforms.
Shopify uses strategies such as sales, coupons, codes, or bundles to offer discounts on products to encourage customers to make a purchase. These strategies impact customer psychology in purchasing and create a win-win situation for merchants and customers.
Their main discount pricing strategy is offering subscription discounts on specific amounts of product purchases. This strategy works well and encourages customers to come back and buy again as they subscribe already. The more they will buy, the more they will get a percentage discount immediately.
Alibaba follows the quantity discount strategy. The more you buy the more you get the percentage off on inexpensive items for the vendor to ship. The discounts often start from 20% to 60% maintaining the merchant’s profitability. They get fame, popularity, and positive reviews, while their expenses go down dramatically.
IKEA follows a unique discount pricing strategy, naming discounts “new lower price” and “IKEA family member discounts.” By naming the discounts as new lower prices, they offer discounted prices on a large amount of products and create urgency.
IKEA family member discounts are rewarding the loyal customer base. Also, they kept a category for offering monthly discounts on different products. By giving customers the advantage of enjoying the discount price all year round, they keep shoppers engaged.
When a buyer goes shopping, the price of the product impacts the customer’s buying decision. Here’s the role of discount pricing works. It gives shoppers the option to explore and decide.
Below we’ve discussed the most effective discount pricing strategies for Shopify store owners:
Volume discount is also known as quantity discount, this type of pricing strategy is implemented wherein a price reduction is offered to buyers for bulk orders.
There are two types of volume discounts:
This type of discount is offered only to encourage buyers to place high-volume orders and boost sales.
This type of discount is offered for a limited time, and it encourages shoppers to become repeat buyers.
Volume discount strategy usually works for B2B eCommerce channels.
We’ve given an example of a Quantity discount from a Shopify automatic discount app.
Seasonal discounting is an effective discounting tactic for attracting shoppers with limited-time discounts. These discount marketing promotions help to drive traffic and increase the conversion rate of the Shopify store.
Seasonal discounts are mainly applied to specific products that repeatedly come every year. That’s why store owners need to sell those items within a limited time to make room for the new stock.
For example, People tend to buy more during the festive seasons or gifts for their loved ones. So, offering seasonal or festive discounts emotionally connects the merchants and customers, thus boosting sales.
Shopify store owners can Schedule discounts by using the best Shopify automatic discount app. We’ve given an example of a scheduled discount by using DiscountRay.
A bundle pricing strategy works when you sell multiple items simultaneously and offer an overall price reduction. Shoppers find it attractive because the item’s price becomes lower than the actual price.
The bundling of products helps to reduce slow-moving inventory and excess stocks. It is also important to offer the flexibility of buying individual products along with bundles.
For example, a hair care brand may create a bundle that includes a shampoo, a conditioner, and a hair serum. If a customer doesn’t need or want hair serum, they may not buy the bundle. In that case, you should ensure customers have the freedom to purchase individual products.
Both customers and retailers benefit from bundle pricing. You will be able to save your buyers time when they shop, while also increasing revenue and conversions.
First impressions matter, right? That’s the tactic you should follow when offering discount pricing in your eCommerce store. It helps to build a sustainable relationship with your first-time buyers. Also, gives them a positive sense of trying a brand that is completely new to them.
”A 2012 survey found that a discount attracts close to 80% of new customers.” In another survey, “two-thirds of consumers purchased just because they saw a discount.”
Discount makes everyone happy and releases happy hormones. And repeat customers like to be rewarded. It encourages them to buy again, it’s a common customer’s psychology. So why not leverage the psychology of discounts to make more money from existing customers?
Repeat customer discount plays an important role in discount pricing in eCommerce.
Customers receive referral discounts by referring a new customer to your Shopify store. Store owners use code to offer this discount. It’s a two-way discount. For the first purchase, they get a discount but every time they refer new shoppers they get a discount. The amount of discount depends on the number of new customers they can bring in.
Offering discounts without calculating them is one of the drawbacks for store owners. Shopify store owners should have this ability first before offering a discount to their stores.
It’s one of the most essential abilities to manage finances and calculate discounts.
Discounts are calculated by multiplying the main price by the discount percentage expressed in decimals. You must calculate the difference between the item’s initial price and the discount to get its net selling price.
Here, we’ve explained below the steps on how to calculate discounts:
Decide the difference between an item’s list and final selling prices.
Cut down the selling price from the list price to get the value of the discount amount.
Find the ratio between the discount amount and the list price, then multiply it by 100 to get the discount percentage.
Let’s look at an example. If a jacket has a $45 list price and a $30 selling price, you may decide the discount by deducting the selling price from the list price.
That is, $45 – $30 = $15. You now need to find the ratio of the discount amount and the list price, which is $15/$45, to sum up the discount percentage on the shirt. Do it by multiplying it by 100.
It means that 15/45 × 100% equals 33,3%, so the garment is now 33,3% less expensive.
Finally, discounts without proper calculation can damage the core of your Shopify store. Thus failing to generate the revenue you opt for.
No matter how important the role of discount pricing is, there are always some pros and cons. We’ve found out some and discussed below.
Discounts can help businesses finalize transactions, especially when offers are about to expire. However, discounts are only for limited-time sales tactics, not an overall sales strategy to follow every day.
By lowering the “activation energy,” discounts encourage quicker purchases, helping customers decide without excessive hesitation.
Initial discounts can attract new customers who may not have found your business otherwise. This positive first experience can lead to repeat purchases, even after discounts are no longer available.
Customers introduced to your brand through discounts may expect reduced prices permanently, making it harder to upsell premium offerings or higher-value products later.
Discount-driven buyers often have a shorter customer lifespan, as they may not return once the discounts are gone.
Overusing discounts may tarnish your brand image, making it seem like a “bargain brand.” This could shift customer focus from quality or uniqueness to just price, ultimately affecting long-term reputation and profitability.
Discount pricing strategy re-engages customer interest and brings them back for repurchases. But to boost customer loyalty, it’s important to develop a sense of exclusivity around your discounts, giving a segment of customers special deals and benefits.
Moreover, there are two ways to improve customer loyalty.
According to Statista, businesses can boost their revenue through repeat buyers by up to 60%. So, it’s vital to keep an eye on implementing the discount pricing method properly to improve customer loyalty.
Discount is not always a good idea for sure but not a bad one as well if executed properly. Sometimes you have to pamper your loyal customers to boost your B2B sales.
Rewarding customers can seem like the right thing to do because it can boost your sales numbers quickly, but it can come with some serious drawbacks as well.
You might ask, what’s the problem, everyone is discounting.
Here’s the problem, you’re not seeing the whole scenario. Offering discounts initially seems okay. But if you target higher revenue, you’ve to look at the bigger scenario, such as boosting sales numbers, increasing revenue, and starting brand loyalty.
However, discounts might give you instant happiness. but it affects in the long run.
Likewise, discounts aren’t always bad. They can secure a high customer lifetime value on items that require repeat purchases.
Discount pricing not just align with marketing strategy—it’s a powerful tool that taps into customer psychology, influencing behavior and decision-making in the competitive world of e-commerce. By understanding how shoppers sense and react to discounts, Shopify store owners can effectively use this strategy to maximize engagement and sales.
At the core of discount psychology lies the concept of deciding what things are worth. Customers are naturally drawn to deals that make them feel like they’re saving money or gaining more value for their purchase.
Discounts, whether percentage-based or fixed-amount, create a psychological motivation by reducing the mental “cost” of the purchase.
FOMO(Fear of missing out) is another psychological term in discount pricing. Limited-time discounts and flash sales create urgency, encouraging customers to act quickly to secure a deal. This urgency initiates an emotional response, leading to faster buying decisions.
Discount pricing also relies on how it is displayed. When a product’s original price is displayed alongside the discounted price, customers can differentiate if it’s a greater deal. Sometimes even though they’re not familiar with the actual price they sense the happiness of getting a great value.
Another psychological factor is exchange. When customers are offered discounts, they often feel rewarded. Personalized discounts, such as those for birthdays or loyalty milestones, strengthen this effect by making the customer feel valued.
Shopify store owners often combine discounts with strategic bundling or tiered pricing. For example, a “buy two, get one free” offer not only provides actual savings but also gives customers a sense of achievement.
Lastly, the role of discount pricing in eCommerce isn’t just about offering lower prices. It’s about understanding the psychological motivations that drive customer behavior. Merchants can build trust, enhance loyalty, and increase sales by aligning discounts with customer emotions and decision-making patterns.
Discount pricing is an essential strategy in e-commerce, driving rapid and long-term benefits for businesses. It plays a key role in attracting and retaining customers and boosting brand loyalty and sales. By strategically offering discounts, businesses not only encourage higher spending but also improve inventory turnover and address competitive pressures effectively.
Discount pricing is a kind of pricing strategy in which you can fix the prices of your products. The ultimate goal of a discount pricing strategy can be to increase sales in your Shopify store, clear your inventory, or stock new items. Overall, boost sales.
It is well known that discounts play a significant role in consumer purchasing decisions, shaping perceptions of value, urgency, and affordability. As a result of discounts, products become more affordable and more available to consumers.
Promotional pricing is a sales strategy in which stores temporarily reduce the price of a product or service to attract potential customers. By lowering the price for a short time, store owners can increase the value of a product or service by creating a sense of lack of a specific product.
Discounts make everyone happy, and science says it releases happy hormones to make you feel good. Studies tend to show that when a customer receives a savings offer, they are more likely to become more relaxed and happier. The more positive feelings your store can help instill in your customers, the better your chances of reaping long-term benefits!
Offering discounts can have both positive and negative impacts on a company’s profits. On one hand, discounts can attract customers and increase sales volume, leading to higher revenue. On the other hand, discounts can also reduce profit margins. Unplanned discounts reduce the overall revenue per sale.
Discount pricing strategy re-engages customer interest and brings them back for repurchases. But to boost customer loyalty, it’s important to develop a sense of exclusivity around your discounts, giving a segment of customers special deals and benefits.
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