Many e-commerce businesses employ a standard promotional calendar built around discounts to drive volume at specific time periods (e.g., year-end holidays). Having a well-defined calendar may train customers to wait for the deal before buying and erode your margins. Your sales and customer data can answer questions such as what percentage of customers only buy during your promotions and what percentage of customers add non-promotional items to their basket. These answers will help you understand whether you are merely training your customers to wait for the deal or whether these promotions deliver increased value for your business. If a large share of customers only purchase on promotion, the alternatives below are worth testing.
Whether scheduled discounts make sense for your business depends on your overall strategy and positioning in the market. If you are a premium brand, you likely want to avoid explicit discounting, which can cheapen your brand perception. If you are in a highly competitive market with a value-focused brand, discounting could be a good strategy.
Discounting is often the easiest tactic for e-commerce businesses to consider, but there are other options that may be a better fit based on your company’s goals, including:
Bundling: creating special bundles around seasonal activities that give the customer additional value and allow them to explore other products
Loyalty programs: rewarding repeat purchases to build a long-term relationship with the customer
Referral rewards: encouraging existing customers to become ambassadors and bring others into the brand family
Seasonal offerings: providing limited-time products or seasonal packaging to encourage visits during specific time periods
Customers will receive discounts through loyalty programs and referral rewards, but they earn them by making repeat purchases or bringing new customers to the brand rather than waiting for the next sale.
Scheduled discounts are not inherently right or wrong. Whether to use discounting as a tactic is an important decision that impacts your positioning and should align with your overall strategy. If your goal is to lift volume at the expense of margin, scheduled discounts can be a good approach. However, you should think about what you are giving up in return and whether you are training your customers to wait for the deal. Some of the options above may offer an alternative way to create value for the customer and your business.
How are you thinking about loyalty and discounting for the upcoming holiday season and in general?
Related article: Are you stuck with cost-plus pricing?
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