Discounts and sales promotions have become ubiquitous in the world of retail and e-commerce. As a business owner, you may think discounts eat into your profit margins. However, strategic discounting attracts new customers, increases sales, clears old inventory, builds loyalty, and provides other benefits.
In this comprehensive guide, we will explore the top 15 reasons why you should offer discounts to attract more customers and help your business grow.
15 Major Reasons To Offer Discounts To Attract New Customers To Meet Sales Goals and Promote Brand Awareness
One of the biggest reasons to offer discounts which attracts customers is because it increases the perceived value of your products or services. Perceived value is how much benefit a customer believes they will get from a product, compared to the costs.
When you offer a discount, it lowers the customer’s cost, without changing the actual value of what you are selling. This makes the deal seem more valuable in the customer’s mind.
For example, a $50 shirt seems more worthwhile when it is 25% off, so the customer only pays $37.50. Even though it is the same shirt, the customer feels like they got a better deal and more value for their money.
Discounts make customers feel smarter for finding a great deal. This makes them more likely to buy from you over competitors who don’t offer discounts.
Discount offers create a sense of urgency and scarcity. They signal to customers that this is a limited-time deal that will soon expire.
Fear of missing out on the discount can motivate customers to act quickly. If they wait, the deal might disappear. This gets customers to buy from you instead of taking time to shop around.
You can reinforce the urgency of a discount by including expiration dates and using words like “limited time only” in your promotions. The more urgency you create, the more sales you will generate.
For customers who are unsure about purchasing from your business, a discount provides a low-risk trial opportunity.
Rather than paying full price to try your product or service, they can take advantage of the lowered cost to give it a test run.
If customers have a positive first experience thanks to your discount, they are much more likely to become repeat, full-price customers down the road.
You can even structure the discount to encourage repeat business, like offering 20% off their first purchase and 10% off the next 2 purchases.
Discounting is an effective way to clear old, excess or slow-moving inventory from your shelves or warehouse.
Rather than letting unsold merchandise take up space and become obsolete, putting it on sale removes the inventory backlog and frees up room for new products.
Seasonal goods in particular often go on sale after peak periods, like holiday decor after Christmas or swimsuits at the end of summer. Discounting accelerates the sell-through process.
Advertising a sale or discount code will inevitably bring more traffic to your business. Many Customers actively seek out and share good deals.
Increased traffic gives you more opportunities to convert window shoppers into paying customers. Even if they don’t buy the discounted item, the trip to your store or website exposes them to your full range of products and brand awareness.
Offering discounts to your customers also gives existing clients an excuse to come back and see what’s new. The more visits you get, the more you increase and boost sales.
Offering discounts to repeat customers is a way to build customer loyalty and encourage larger lifetime value.
Many businesses have formal loyalty programs that provide points, tiered benefits, or special VIP access along with discounts for their best and potential customers.
Even without a structured program, you can foster loyalty by offering occasional coupon codes to customers who have purchased from you before.
Rewarding repeat business with discounts gives customers more incentive to choose you over the competition next time they buy.
In a crowded marketplace, discounts can give your business an edge over competitors who don’t offer them.
When customers are shopping around and comparing prices, your discount makes your offer more appealing. This converts more shoppers into potential buyers.
Exclusive discounts also add perceived value, because customers feel they are getting special savings that others don’t have access to.
Just be careful not to enter price wars with other businesses constantly undercutting each other. Use discounts strategically to stay competitive.
Upselling and Cross-selling
Once you have attracted customers with a stellar discount offer, take the opportunity to upsell or cross-sell additional products at full price.
Upselling means encouraging customers to upgrade or enhance the product they are buying. For example, upsell a deluxe kitchen mixer when they add a stand mixer to their cart.
Cross-selling means recommending complementary products that go along with their purchase. If a customer buys baking ingredients, cross-sell them on bakeware.
Discounts bring customers in the door, while upselling and cross-selling increase the size of their basket or order. This leads to higher revenues.
Word of Mouth
Satisfied customers who saved money thanks to your discount are highly likely to tell their friends and family about it.
When someone has a positive experience getting a good deal from your business, they naturally want to share their shopping success story with others.
This word-of-mouth marketing comes free of charge, allowing you to reach new audiences. With social media, sharing discounts is faster than ever.
The more people pass along a discount, the more new customers will come try it out.
Seasonal and holiday discounts are something customers eagerly anticipate each year from retailers.
Shoppers are accustomed to looking for big sales tied to seasons, like back-to-school discounts in the fall or after-Christmas sales in December.
By aligning discount promotions with major shopping seasons, you can attract deal-seeking customers when they are most excited to buy.
Seasonal discounts also clear older inventory to make room for new seasonally-relevant products. The huge volume of seasonal sales offsets smaller profit margins.
Increased Sales Volume
One of the main goals of any discount is to immediately increase sales volume, whether your aim is higher traffic, attracting new customers, or clearing stagnant inventory.
While you sacrifice a bit of profit on each discounted item, selling higher quantities makes up for it.
The more customers buy thanks to your discount, the more your overall revenues will rise. Even if your margins are slimmer on discounted products, the sales spike still benefits your bottom line.
Just be sure you have plenty of inventory on hand to meet the higher demand a good discount will generate.
One of the advantages of offering discounts to customers provides a prime opportunity to collect customer data, which has enormous marketing value.
You can require email signups in order to access discount promo codes or loyalty program savings. This builds your email list.
Discount codes can also be tracked to provide insights on customer behavior – what products attract the most interest, time of day, demographics, and more.
The data you gain from discount promotions and redemptions allows you to better understand your customers and tailor future offers to their preferences.
Re-engaging Old Customers
It costs 5 times more to attract new customers than to retain existing ones. Discounts are a way to re-engage customers who have been inactive for awhile.
You can target lapsed customers who haven’t purchased in several months with special incentive to win back their business.
The discount gets old customers shopping with you again, reactivates the relationship, and makes them more likely to keep buying moving forward.
A loyalty program also encourages customers to keep collecting points and benefits. The savings might entice them to return before they drift away for good.
Breaking Entry Barriers
Some customers may want to buy from you, but find your prices out of their budget range. A discount lowers the barrier to entry.
For example, a luxury brand can offer coupon codes to make high-end products and services more accessible to aspirational buyers with lower disposable income.
First-time customers may not take the plunge unless the cost seems justified by a discount. It lets them try you out affordably.
When budget is the main obstacle, a discount give customers permission to buy and eliminates the #1 barrier.
There is immense psychological enjoyment and satisfaction that comes from getting a good deal. Saving money literally triggers the release of dopamine and oxytocin.
That feeling of happiness and excitement, when customers score a bargain or discount, creates positive associations with your business.
The joy of pursuing and finding discounts makes the shopping process fun. Customers will return again and again to chase that high.
Ultimately, discounts make people happy. Taking advantage of that human instinct is a surefire way to drive sales.
Types of Discounts Offered to Customers
There are many different types of discounts businesses utilize to attract customers. The most common discounts include percentage off or dollar amount off discounts. These directly reduce the price of a product by either a fixed dollar amount (for example, $10 off) or a percentage of the original price (like 25% off). Percentage or dollar discounts can apply to individual products, entire orders, or shipping costs.
Another popular discount tactic is Buy One, Get One (BOGO) deals. As the name suggests, customers who purchase one product at full price get an additional unit for free or at a reduced cost. BOGOs incentivize customers to buy more in order to receive the extra free or discounted item. Similarly, businesses offer bundle pricing, where purchasing a group of products together is cheaper than buying them separately.
Beyond straightforward price reductions, loyalty programs offer savings for repeat customers the more they spend. Referral programs provide discounts when existing customers refer new ones. Limited-time discounts add urgency and excitement. Competitions, giveaways and rebates also lower costs in creative ways. The options are endless, giving businesses flexibility to structure discounts that entice their particular target audience.
Advantages of Offering Discounts to Customers
Offering deals and discounts provides numerous benefits for businesses looking to entice customers, increase sales, move inventory, and build loyalty. One major advantage is that discounts attract attention and website traffic when promoted through advertising and social media.
They essentially function as bait to get customers in the door, either physically or virtually. Once on your site or in your store, even if the shopper doesn’t end up buying the discounted product, they are exposed to your full range of inventory and brand experience.
Discounts also make existing customers feel valued through special savings. This fosters brand loyalty and larger lifetime value, as happy repeat customers tend to spend more over time compared to one-time buyers.
Strategic discounts tied to specific audiences like students or seniors can also boost your reputation as a business that cares about community. Overall, well-planned discounts allow you to meet sales goals efficiently while nurturing lasting customer relationships.
Offering strategic discounts provides a range of benefits that attract new customers, increase sales, clear inventory, collect data and build loyalty.
Keep these 15 reasons in mind as you plan discount promotions and offers. Take advantage of the psychological satisfaction and urgency discounts create while positioning your business as an attractive value compared to competitors.
Discounts should always have a direct purpose tied to your business goals. With the right offer targeted to the right audience at the right time, discounting done well is a proven sales generator.