Giving a discount to boost your sales? 12 tips for effective discount campaigns
Giving a discount is a smart strategy to boost sales. These 12 tips help you optimise your discount campaigns and prevent common mistakes.
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#1 Do you really need to give discounts?
Before you give discounts, you need to ask yourself one important question:
Why am I even considering selling at reduced prices?
Many entrepreneurs don’t know the answer to this question. Or worse: they don’t even ask this question. After all, everybody loves discounts and that seems to be an excellent reason to include it in your sales strategy.
My competitors give discounts, so I don’t have a proper choice.
My customers expect to get a discount.
Discounts are deeply integrated in my industry.
If I don’t include discounts in my pricing strategy, my customers will not come back.
Discounts are the easiest way to attract new customers.
Reduced prices are the only way to make sure I will sell my stock.
The main purpose of giving discounts is to make more money.
Lowering your prices to gain more profit sounds paradoxical. And yet, often, it works. However, discounting is not your only option to achieve the dream of running a successful business.
You can attract new customers by being more active on social media.
You can feature products on your webshop or in your newsletter.
A press release for a new product or service can attract and convince people to buy your products or services.
You always have a choice. The easiest one is not always the best.
Discounts are not the only stairway to profit. You have other options to convince customers and sell more.
#2 Set a SMART goal for your discount campaign
As an entrepreneur, you are probably familiar with SMART goals. Applying the 5 criteria to discount campaigns is easy and powerful. Let’s have a look at an example.
Example of SMART goal applied to a discount campaign
Matthew wants to extend his freelance photography business. His strategy is simple:
Launch a new service: wedding photography.
His first step is to take professional photos of his sister’s wedding.
He will run social media ads and offer a discount as an additional incentive to convince new customers.
Matthew wants to take wedding portraits of 5 couples in the next quarter by offering a discount of 25%.
His SMART goal sets him up for success.
Specific: it is about wedding photography, not any other sort of his services as a photographer.
Measurable: 5 couples. Either he finds them, or he doesn’t.
Achievable: A quarter comprises 13 weekends and not everyone marries during a weekend.
Realistic: he didn’t aim for 100 couples and the discount offer is not fixed either. If needed, he can change it to 50% or more.
Timely: the end of next quarter is a clear deadline. The period is also long enough to make it work.
These 5 elements are vital for all your business related goals. In the next tip, we will deal with the most important one for products or services on sale: time.
Smart goals help you set up successful discount campaigns.
#3 Always put an expiry date on your discount offer
Time pressure is an excellent motivator. If you run a freelance business, you have probably experienced the magic of an approaching deadline.
This is exactly the same for discount expiration dates. It leaves people little to no time to ponder.
If I don’t buy now, I will need to pay more later.
If I buy now, I will have made a nice bargain.
Reduced prices + time pressure = success
If only it were that easy…
Time is fluid. It covers the entire range between a nanosecond and eternity.
It is up to you to decide how long your discount campaign will run.
Some businesses thrive on giving discounts. Reduced prices all year round. This is more than a pricing strategy. It is branding.
People know (and buy from) the business mainly because of its discount reputation. The trick here is to change the products quickly so people have enough reasons to come back and profit from new bargains.
This approach may work for some businesses, but not for yours.
Sometimes the time to run a discount campaign is limited in time by nature. Think of e.g.:
Black Friday discounts
Mother’s day campaigns
The challenge for you is then to find the perfect timing to launch your campaign. Before, together with, or after all your competitors are fighting for the attention of consumers.
Communicate your discount deadline
Always make sure your customers know exactly how long your offer will be valid. “Temporarily” is vague, so instead, use something like:
This offer is valid until ...
Only today. Sales.
1 day, 12 hours, 3 minutes and 6 seconds left
Shorter discount periods do not automatically lead to more sales. It depends on what you try to sell and where people can buy from you.
A countdown timer works on a website, not in a physical store.
Decide, experiment, and, above all, take a reasonable announcement time into account. Give people a fair chance to discover your discounts.
Plan your discount campaigns thoroughly
Bargains give consumers an endorphin shot, provided they had the chance to buy before your discount deadline expired.
People who miss out on your sales may turn against you.
You cannot prevent this 100%, but you can:
Remove the sales campaign from your website, e-commerce site the moment it ends.
Inform people in different places: your newsletter, social media…
Too obvious for you?
Let's move to a less obvious place for discounts: invoices…
Limit the time of your discount campaigns.
#4 What’s the difference between a commercial and a financial discount?
Giving discounts is not limited to marketing messages. You can also offer discounts on your invoices.
At least, that's the case in Belgium. If your business is established elsewhere, consult with your accountant.
So, in Belgium, you can officially give two types of discounts on your invoices. Good news!
Here comes the bad news. The rules for calculating VAT are complicated. On top of this, they differ for both types of discounts.
We don’t like stories with unhappy endings, so here is some other good news. CoManage calculates the discount (and other) VAT amounts automatically for you.
Commercial discount: selling more
When you grant a commercial discount, you clearly have a… commercial intent. You want to sell more and volume discounts are your strongest sales argument.
Financial discount: faster payment of invoices
A financial discount is ideal if you want to entice customers to pay your invoices fast.
You can compare invoice payments with a game of 3 levels.
Pay the invoice before the discount date and you will get a discount.
Pay it later than the discount deadline and you will pay the full price.
Pay the invoice too late and you will need to pay an administrative fee on top.
Deadline, customers can choose, a reduced price… The financial discount seems like a perfect example of an effective discount campaign.
Only it is not.
The receiver has already ordered, so your intention is not to sell more. Your goal is now to speed up the payment process.
Indirectly, this may lead to more sales. But then your customers need to return and you need to maintain the habit of offering them financial discounts.
This may work for some customers, but not everybody is going to profit from your offer. Think of e.g.:
Financially unstable customers who cannot afford to pay your invoice in due time.
Companies with a strict organisational structure may need more time to approve payments and therefore miss out on your gentle offer.
Disorganised companies forget, lose or even ignore their administration.
Again, the best way to find out if this will work for you: experiment.
In CoManage, you can easily include discounts for one invoice only. Or you can configure this for specific customers, products, services.
#5 Calculate the ROI of discount campaigns beforehand
Another important aspect of discounts: how much money will they bring in?
Your return on investment (ROI) is not the same as your regular price minus the discount. Running a business is more complicated than a simple formula. You know this, don’t you?
So before you decide to give a 10, 20… 90% discount, take a calculator and a paper and write down every cent you will need to spend.
Your purchase price minus the discount
The budget to create and promote the discount campaign, including: creating ads, advertising budget, adapting your website or webshop, printing cost for flyers, setting up analytics, tracking, measuring, etc.
Logistic costs: how much would you pay if you need to store unsold products?
Shipping costs (important if you offer free shipping)
If you end up with a cost to set up your campaign of 1,000 euros and a sales figure of 500 euros, you’d better rethink your campaign.
Obviously, for services, you won’t need to take logistics costs into account, but you may need to hire freelancers or buy additional software to live up to your customers' expectations.
Wild guessing a discount percentage is not a strategy. It’s a bet and that may go completely wrong.
#6 How to display your discount?
You have two options to display your discount: as a price or as a percentage. Or you can show both.
Choose the option that makes the difference with the regular price look bigger. Let’s clarify this with some examples.
Discount expressed as price
A 5 euro discount on a 1,000 euro order won’t woo many people.
A 5 euro discount on a 20 euro product will probably boost your sales.
Discount expressed as a percentage
Percentages require more thinking. Which of the two discounts is more appealing?
50 euro discount on 1,000 euro purchase
5% discount on 1,000 euro purchase
In both cases, the discount is 50 euros. But you would probably have preferred the second offering, because 5% of 1,000 looks more than 50 euros.
Mention the original price
And how about a discount of 99,999 euros? Without knowing the original price, that can be a lot, or not.
A mansion of 6 million euros
A car of 250,000 euros
Make your sales look as attractive as possible. Pricing is more than showing numbers.
#7 Make sure your discount is a real discount
Discounts are in reality all too often nothing but misleading marketing stunts.
Luckily, alert consumers keep a close eye on prices. Every year, during Black Friday and Cyber Monday, they expose companies who try to trick people into believing that their discount offer is a once-in-a-lifetime opportunity.
Don’t be one of those companies.
Lies about discounts can only bring in small successes. In the long run, they will burn your reputation and… bank account.
#8 Ask something in return for your discount
Besides an expiry date and a reduced price, you can add more conditions to make your discount campaign successful.
You can, for example, only grant a discount for
a certain volume or combination of purchased products.
the first 100 customers
a like on Facebook
a picture with your company hashtag on social media
These are very common marketing strategies for B2C environments.
Consumers are used to doing something in return for a discount. Maybe you can apply these tactics to your B2B business? In the end, all businesses are run by people.
If you give something (discount), you can ask for something in return. This could be a physical visit to your business, valuable customer data, or a helping hand that promotes your brand on social media.
#9 Explain (briefly) why you are giving a discount
You need a good reason to offer your customers a discount. If you don’t give one, your offer may look suspicious.
10% off on roof toppings
15% off on your logo design
When important information is missing, our brain fills in the gaps. With no further context, a discount can be interpreted as a sneaky way to get rid of trashy products or services.
In supermarkets, “10% off” may be sufficient for food that is about to expire. But in your business, you may need to add an explicit reason your prices have fallen.
You don’t need to overcomplicate things. Most times, adding a time indicator is enough to make your discount not look like a desperate attempt to sell more.
Summer Holiday: 10% discount
Another, and probably a better option, is to include the reason for your discount in your campaign name.
#10 Give your discount campaign a name
Give your discount campaigns a catchy or clear name. This may sound silly, but there are quite a few advantages to doing this.
A campaign name avoids misunderstandings. If you pick a clear one, people will immediately understand it’s a temporary offer.
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Table of contents
Click on topic to learn more about how to optimise your discount strategy and campaigns.
Valentine’s Offer vs 10% off on chocolates
Even when you run only one discount campaign, you can still try out different names on different channels.
Naming discount campaigns is an old-school marketing trick. Even in the online world, it still works.
Celebrate Mum vs 10% Off on Flowers
If you’re having troubles coming up with a creative name, you can use an obvious one like:
Father’s Day Promotion
A name is not just a name. It can also express exclusivity. And that’s something people love to hear.
If you use a CRM it is easy to identify your most loyal customers and only grant them a:
Loyal Customer Discount
Next time you run a discount campaign, put on your creative hat. And see what happens.
Giving your discount campaign a name can prevent confusion amongst customers and even convince them subtly to buy now.
#11 Which products or services sell better with discounts?
You can give a discount on all your products when you
want to get rid of your stock
plan to renovate or move your business
offer seasonal products
In all other cases, this may not be the best strategy. A discount on a selection of products works better. Question is then: which ones?
Leave your best-selling products or services out of your discount program. Your sales figures have proven that your pricing was right.
Discounting new products or services
Discounts are perfect for new products and services. For you, this is also an excellent opportunity to test out your pricing.
Let’s illustrate this with Olivia’s freelance business.
Olivia is a graphic designer and decided to create social media videos for her customers. She investigated some competitors and came up with an average price of 150 euros per video.
Olivia doesn’t have all information though:
Will her new service be cheap or expensive for her current customers?
Will they be interested in videos, anyway?
Will it take her a lot of time to create a video?
She launches her service with a safe price of 200 euros per video. The 50% discount makes it look like a bargain. Now, all she has to do is wait…
Your cheapest or least popular products or services
Give discounts on products you want to get rid of.
For services, you may want to promote smaller services that give customers a taste of your quality.
If you are a freelance translator, for instance, you may offer your customers a subtitle file for their videos at a reduced price. It’s something they will need anyway and in the future, they may order it from you instead of creating it themselves.
Your most profitable products or services
You can also give a discount on products or services you want to sell more of.
When you highlight them with reduced prices, people will most likely order them. You can then collect testimonials and show these once your discount campaign ends.
More testimonials will convince more customers. But this time, they will pay your regular price.
You can give a discount on nothing, anything or everything.
#12 Don't discount your hourly rate
When it comes to offering discounts as a freelancer, you face an additional challenge. If you don’t sell goods and you charge customers per hour, discounts may get you into trouble.
Let’s assume your hourly rate is 50 euros. At one moment, you offer a discount of 20%. An hour is still 60 minutes, but yours will be… 72 minutes.
Time is your most valuable asset. It’s an important part of your formula to calculate and create your income. Alas, you cannot change the amount of hours in a day.
Giving a discount on your hourly rate may bring in new customers or more projects. In the long run, however, this pricing strategy can have a negative effect on your business.
Customers may interpret your non discounted hourly rate as too high. If you did a job for 20% less money, you may as well do the next assignment at a reduced price too.
All the above doesn’t mean that you have to exclude discounts in your freelance business.
Discounting your freelance services can work to your advantage. But only when you grant it on a project basis. Don’t discount your hourly rate
Conclusion: do discounts boost sales?
Pricing your products and services is an art. You need to make a profit and stay competitive.
Including discounts in your marketing or pricing strategy can dis-balance your business. You have no guarantee that discount campaigns will help you sell more. There are too many factors you don’t control.
Wrong decisions about timing and discount prices may undo all your good intentions and projected income.
The 12 tips in this article hopefully help you make better decisions about discounting.
But in the end, you will have to experiment to find the sweet spot that makes discounting worthwhile for both your customers and your business.