Lowering the price of a product is a strategy to boost sales. Most sellers and manufacturers consider sales discounts to draw customer’s attention. But, how much discount should you offer to increase your sales without affecting your profit? Your discount rate should not have an adverse effect on your revenue. So, let us help you determine the right discount level. In fact, several factors play a role in influencing your decision on the discount percentage.
‘Sales discount’ is an attractive term for potential customers. Businesses in the eCommerce and other industries offer discounts. Clearance sales, seasonal offers, and flash sales are some common promotional pricing programs. Whether you belong to the B2C or B2B industry, you need to allure clients with discount offers.
20% vs 50% Discount
If your customer has placed a big order, you can think of offering a 50% discount. Your customer will also consider it a lucrative discount level. In most cases, sellers dealing in digital products need to offer a 50% discount.
Especially if you want to offer time-limited sales, a big discount (such as 50%) is a good choice. For instance, you can use your Twitter or Facebook page to declare-
Flat 50% discount on every deal until tonight.
So, this declaration will trigger a sense of urgency, as you have set a very tight deadline. However, remember that a too-high discount may make your customers skeptical about your product value.
As a digital product seller, you should communicate the product value efficiently because it is intangible.
Now, let us talk about the 20% off strategy. Many sellers choose this discount category, as it is not too generous for them. Besides, customers will be able to calculate the amount they will save. At the same time, you will gain a good amount of profit.
Before deciding on the discount percentage, you should know about various categories of discounts.
Offer an attractive discount to customers who have purchased a large number of products. So, they will be encouraged to place a bulk order. You can adjust the price depending on the number of products bought by customers.
It is another type of discount for large orders. Your B2B customers who make bulk deals regularly will get discounts.
Offer a membership card to your regular or loyal customers. Make the discount available to a particular group. It shows how you appreciate customer loyalty and want to develop brand loyalty.
Offer discounted items or free gifts to customers who have met a certain purchase limit.
During peak season, your discounts will improve sales. It will also help you beat your competitors. However, some businesses consider seasonal discounts during slow periods to increase sales.
Which Factors Help you Decide on the Discount Percentage?
We cannot mention any particular number as the right discount rate. The ideal rate depends on your product type, industry, competitors’ activities, and many more. So, we have listed the factors influencing the discount rate.
The date or time when you offered discounts last
Every buyer loves attractive discounts and sales. However, frequent offers may affect your business adversely. Modern customers are picky and savvy. They often feel that there is no need to buy full-priced products. If you offer more frequently, you will not be able to sell items at a standard retail rate. Moreover, budget-conscious customers may delay a purchase because they know you will declare the next sale very soon. Customers will like to wait for better and bigger deals.
Thus, before announcing the discount, you should review your previous sales offers.
Customer’s Lifetime Value
Discounts allow you to draw new customer’s attention. When a new customer makes his first deal, you can boost follow-up sales with different strategies. For instance, you can run email marketing programs or offer a discount on the second purchase.
If you plan a future discount, it is essential to determine the initial discount’s cost against the value of new customer acquisition.
When you offer a discount, you should be ready to sacrifice a particular amount of your initial profit.
The Competition Level in your Industry
You may need to compete with other businesses that sell similar services or products. In this case, you should offer a higher discount on your product to attract more sales. On the contrary, if your product/service is unique, you can avoid offering a discount.
The Amount that Consumers are Ready to Pay
In some business niches, consumers are willing to pay a high price. They are also ready to pay the price in full even if you offer a sale. On the other hand, consumers in some industries want to pay the lowest possible price for the service/product.
Should you Offer a Fixed Price or a Percentage Discount?
Market analysts and experts have found that most consumers prefer a percentage-based discount to a fixed price off. Many sellers also choose percent discounts to improve sales.
For example, you want to sell a shirt that costs $20.
Now, should you declare a 25% discount or a $5 off?
Of course, the customers will prefer the first option.
However, the scenario is different in the case of a higher-priced product. For instance, you sell a product that costs $2000. A 25% discount is not as attractive as a $500 off.
So, depending on your product prices, you can make your decision.
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Offering a discount on your product is a good strategy to strengthen your sales effort. However, it is sometimes difficult to determine how much discount you should offer. You should focus on the discount type and percentage before making any announcement. Your situational awareness, industry knowledge, and thoughtfulness will enable you to make the right decision.
Besides, the frequency of offering discounts is another significant factor that affects your overall profit. Discount-only buyers will not give you long-term benefits. Thus, you can offer discounts to new customers or customers who have already developed a relationship with you.