Customers like to think they’re getting a good deal, especially at this time of year, and many retailers naturally offer discounts and deals to attract more sales.
Is discounting a good strategy for retailers though? In this video we’ll look at the pros and cons.
There are quite a few reasons for retailers to offer discounts. For some, it’s a way to move out older stock which is due to be replaced – so fashion retailers will often have some late summer deals to make room for next season’s range.
Retailers will also offer discounts as a way to attract more customers at peak times of year, Black Friday for example. Offering Black Friday deals allows them to attract new customers on some of the busiest shopping days of the whole year.
These are customers who might return later and buy again even when products aren’t discounted.
These are sound strategies, but a lot depends on the margins. If retailers can discount and still make a profit, it’s worked.
However, there is a danger that customers are being trained to expect discounts. For example, if a restaurant routinely offers discounts, then diners begin to see these prices as the ‘real’ ones, and are less likely to get there and pay full price.
If you offer deals too often, they are no longer special offers, but can become the expected prices.
The same principle applies to abandonment emails. If customers are offered a discount for abandoning purchases, there’s a risk that this becomes normal behavior, and they end up deliberately abandoning just to get a better deal.
This doesn’t mean discounts should never be used in abandonment emails, but they should be used carefully.
For example, discounts can be offered in the second or third emails sent after abandonment, rather than straight away. Or they can be applied in different regions, if retailers are looking to expand into new markets.
The important thing – and this applies to discounting in general – is that retailers need to proceed with caution when discounting to ensure they’re still making a profit, and not to become stuck in a cycle where customers expect it all the time.
Graham Charlton is Editor in Chief at SaleCycle. He's been covering ecommerce and digital marketing for more than a decade, having previously written reports and articles for Econsultancy. ClickZ, Search Engine Watch and more.