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What is discount pricing?

Discount pricing is a promotional pricing strategy that involves reducing the original price of goods or services, often based on factors like order volume, customer loyalty, or limited timeframes. The goal of a discount pricing strategy is to increase demand, move inventory, and/or drive sales. 

Shoppers appreciate a good deal, and opportunities for lower prices can be attractive. As discounts are often temporary, they can create a sense of urgency that inspires more eCommerce site visitors to convert to customers.

Potential Benefits and Drawbacks of Discount Pricing Strategies

A product or service’s price is the exchange on the value it provides to buyers. Discounts and special offers are powerful marketing strategies that can have a big impact on your eCommerce business. Because of this, discount pricing strategies should be carefully considered and thoughtfully implemented to ensure you’re maximizing benefits while minimizing loss. Let’s explore some of the potential benefits and drawbacks of discount pricing. 

Benefits of Discount Pricing

Discounts can be a great short term strategy for drawing customers to your shop, liquidating surplus inventory, and closing sales. By offering a reduced price for a quality product, less activation energy is needed to inspire customers to make a purchase. For customers who are interested but unsure about buying a product, offering a discount can be a helpful way to close a sale. Discounts can inspire long-term loyalty once customers experience the value of your product. 

Drawbacks of Discount Pricing

While discounts may deliver instantaneous results and be beneficial in many contexts, some types of discounts can pose long term business challenges. The potential drawbacks of discount pricing strategies include a decrease in customers willingness to pay full price when it returns, an increase in churn rates, and complicated growth trajectory. While discounts can be effective in attracting customers, those clients are not as likely to be willing to pay full price once the discount is eventually removed. In this way, discounts can potentially lead to a higher churn rate. Customer loyalty is not consistent so growth patterns are difficult to predict. Furthermore, discounts may also undermine future attempts at upselling or general price increases.

Popular Discount Pricing Strategies

All discount pricing strategies involve reducing the original price, but there are a few different ways to do this. The specifics of your industry, business strategy, products, and audience will determine which discount pricing strategy is the best fit for your goals. Let’s explore the most common discount pricing strategies. 

Seasonal Discounts

Seasonal discounts happen at particular times of the year and consist of price reductions on themed or weather-specific merchandise. This type of discount is often used to sell inventory that pertained to a previous season in order to prepare for the upcoming time of year. 

Clearance Sales

Clearance sales entail steep discounts for a limited amount of time. The products that are discounted may be discontinued or stocked in surplus. Clearance sales are often motivated by a business’s desire to liquidate remaining inventory. 

Volume Discounts

Volume discounts incentivize customers to purchase multiple or large quantities of products. This type of quantity discount rewards customers for buying in bulk and allows retailers to move inventories at faster rates. 

Promotional Discounts

Promotional discounts attract prospective customers and reward loyal customers with temporary price reductions. Promotional pricing can create excitement and increase customer traffic, but when overused, can negatively impact long term sales numbers. 

Loyalty Discounts

Loyalty discounts apply price reductions to purchases made by repeat customers. This strategy can be used to show appreciation for loyal customers and cultivate a stronger relationship with your client base. 

Abandoned Cart Discounts

In March 2021, the card abandonment rate ranged from 76.63% for department stores to 89.11% for the automotive industry. Abandoned cart discounts can entice customers to complete their orders.

Free Shipping

Free shipping discounts involve removing the shipping or delivery fees for purchased goods, typically when the purchase exceeds a certain amount, and this marketing strategy is meaningful for many consumers. According to a survey conducted in 2020, the leading reason why eCommerce shoppers purchased an item was because the shipping was free. More than 50% of consumers report that free shipping will inspire purchases when shopping online. 

Free Gift with Purchase

Although a free gift with a purchase is not technically a discount, it is worth considering alongside discount pricing strategies as a way to incentivize customers to complete purchases, reward customers with something extra, or introduce customers to a new product. 

How to Implement a Discount Pricing Strategy

DynamicWeb offers a cloud-based eCommerce suite that enables businesses to deliver better digital customer experiences and scale eCommerce success through Content Management, Digital Marketing, eCommerce, and Product Information Management Systems. 

DynamicWeb includes a built-in promotion/discount engine that allows businesses to customize their promotions for different scenarios,  whether it’s a fixed amount subtracted from the price, the fixed percentage subtracted from the price, the addition of a free product to an order, the cancelation of shipping fees, variable discount percentages, and loyalty discounts. 

To learn everything you need to know about creating discounts and offers in your DynamicWeb eCommerce platform, read this guide and…

More than 4,000+ brands worldwide trust DynamicWeb with digital solutions. Our customers include leading brands like Lego Wear, Unilever, Winnebago, L’Oréal, Flying Tiger, Toyota, and Europcar. Built on DynamicWeb, these customers are empowered to gain lifelong customer relations, increase revenue and grow their brands.

To learn more about eCommerce solutions, contact DynamicWeb today.