How Coupons, Discounts, and Promotions Can Drive E-Commerce Sales on Shopify
Driving sales to your e-commerce store is certainly easier when the products found there are, well, on sale! Using discounts for your e-commerce Shopify business requires tactical application in order to still pull a profit despite lower item prices. Here, we’ll examine the benefits, downsides, types, and application methods of discounts, promos, and more.
The Pros and Cons of Using Discount Codes, Promos, and More
Using discount codes, promotional sales, coupons, and similar marketing tactics can be a great way to bring in new customers as well as bring back previous ones. There are some downsides to coupons and discounts, and e-commerce experts often advise against using them too often. However, you’ll notice these downsides feel anecdotal and coincidental — that’s not for no reason. Many of the downsides of sales can be easily flipped into positives, and how promotional sales affect a business varies based on the storefront itself. Below, you’ll find some key marketing aspects along with how using such discounts can affect them.
The Pros: If you’re ready to meet sales goals and watch products fly off of your e-commerce “shelves,” discounts are the way to do it. With discounts properly calculated, your profitability is more than possible despite decreased prices. Choose especially popular products to put on sale and see this become even more true.
The Cons: The first downside to coupons is lower lucrativity. With any sale, you automatically engage in decreased profitability due to smaller margins. Of course, you assume that the increase in sales will make up for this loss of profitability, but a less-successful marketing campaign can make that harder.
Customers’ Order Size
The Pros: More money off means more products added to carts. For customers who set spending limits, sales are a haven. With a budget of £50 or £100, they’ll feel more inclined to meet that maximum — possibly even spending over — if they find that the deals are worth their investment.
The Cons: When running a sale, those looking for specific items at a lower price point might visit your site for just that item. This means a highly-sought-after product at MSRP of, say, £40 might be marked to £25. Someone who has been coveting said item will visit for solely that product, and won’t grab additional items.
Customer Brand Loyalty
The Pros: Sales can improve customer loyalty. After all, what better way to show you care about a customer than giving them a percentage off their favorite items? Promo codes work best in situations like these, and sending out personalised discounts via email or other marketing channels for consistent and loyal customers will help make them feel special...plus, push an obligation to spend.
The Cons: A downside to coupons and discount sales is attracting customers that are price-driven, or those far outside of your target market. By doing so, you’re less likely to keep that customer through customer loyalty; they’re here for a good deal and that’s about it. Some sources state that discounts of any kind can actually decrease average order value and size, and which occurs for your Shopify store may be anecdotal. The pro to this con? A customer sporting your goods, even if a one-time buy, can attract other loyal customers through word of mouth.
Stock and Merchandise Movement
The Pros: Discounts offer incentives to not only purchase from your site, but to buy more than they usually would. By applying discounts, you’re likely to experience increased conversions from your site. Moreover, you’ll usually notice a heightened cart size — also known as average order value, or AOV.
The Cons: The downside to offering sales and deals is that customers may not purchase products outside of sale periods. If you offer deals and discounts too often, consumers will know to wait for the next one instead of grabbing your hottest items at their full price.
Your Company’s Brand Image
The Pros: The only thing a customer loves more than your products is your products at a discount. As consumers ourselves, even we know that it feels great to know you got a service or good at less than what it’s typically valued at. This can push a brand image that is consumer-friendly, has budgets in mind, and is accessible to a wide variety of buyers.
The Cons: There’s a fine line to walk between being a brand that offers great deals and a brand cheapened by constant lowered prices. While brand damage is unlikely in the event of sales, Shopify storefronts looking to maintain a level of exclusivity may find that running discounts and coupon codes less frequently is actually beneficial.
The Overall Consensus on Promos, Discounts, and Sales
There’s ways to flip the perspective on these facts, and find positive marketing aspects even in the “downsides.” You may attract customers outside of your target market...but isn’t that what you want? There’s the potential to engage with someone who wouldn't typically choose your store. Similarly, a customer that purchases just one product from your store is better than a customer that never purchases at all.
Using marketing campaigns wisely and analysing the financial results of each one can help you decide what’s most effective for your particular brand. You may be able to sacrifice customer loyalty in the name of moving product, or maybe vice versa. Run promotions with intent as opposed to as a last-ditch effort to push for sales, and figure out what gets your specific audience to buy. Your mileage may vary, as they say.
Types of Promotional Offers
As a business, there are many ways to offer promotions. Providing promotions in different formats can be a great way to set yourself apart from other companies. By running multi-channel promotional offers, you’re sure to find an applicable sales route for every customer, no matter how they subscribe to your marketing campaigns. Here are the “big four” promotional offer types.
Free Gifts and Goodies
A fun way to make your customer experience more enjoyable and personalised is by including a free gift. Free gifts are easy enough to coordinate. Companies usually choose a small trinket that’s low in cost to manufacture. Free gifts aren’t usually totally free, of course, and they’re typically added to existing orders as a goodie. Some Shopify stores specifically send them alongside minimum-order purchases, to guarantee a profit-turning order from a customer. While it may seem as though customers will “incorporate” the value of the gift into their purchase price, the opposite is true: customers will often not think twice and view the gift as entirely free — a great way to boost brand image and loyalty.
One of the biggest reasons customers will abandon their carts is the cost of shipping. It’s harder for consumers to justify the cost of something they will not tangibly obtain. Offering free shipping increases conversions from half-convinced new consumers, and will likely be a driving force for repurchase orders from past customers looking for the right moment to buy from you again. Especially when paired with percentage-off coupons, free shipping is extremely profitable, with the uptick in sales relieving the financial burden of offering free shipping.
Dollar-off discounts take specific monetary amounts off of an order when a purchase minimum is met. You’ve likely seen these discounts as, “Take £5 off of £20, or £15 off of £50.” You’ll see in this example that as the purchase minimum increases, so does the discount — a purposeful tactic driving customers towards higher-value purchases. Dollar-off discounts will usually follow what experts call the “Rule of 100.” If an item is less than £100, choose a percentage discount (as detailed below). Items over £100 can be used alongside dollar-off discounts for better results.
Percentage-off discounts are a popular method of offering smaller discounts on semi-regular basis. Percentage-off discounts may be larger too, offering 40%, 50%, or even 65% off orders, though these are usually attributed to “blow out” sales, holiday deals, or discounts on last-chance stock that needs to be moved. Percentage-off discounts bring the added benefit of appealing to customers on a psychological level. Unlike dollar-off discounts, percentage-off discounts flux with cart value, giving consumers a higher-perceived impact.
E-Commerce Discount Application Methods
Discounts can be applied in a few different ways. Each have their own benefits, and can be chosen based on individual marketing campaigns and their specific goals.
Applied Discount Codes
Applied discounts, also called entered discounts, are ones that require a code to be typed in at the transactional point of the buying process. To make applied discount codes more fun, give them some spice. Name them after a season (“SUMMER15”), a campaign theme (“RINGS4YOU”), or a customer loyalty program (“WELOVEYA25”) to make consumers feel like they’re “in” on a specialty discount. Theoretically, buyers are far more likely to use codes like these than ones written as a random string of numbers and letters.
Automatic discounts apply to carts if they fit certain requirements as set by the storeowner. Shopify offers a lot of customisation in this area. For instance, you can set automatic discounts by product category, allowing for promotional offers like, “Buy two pairs of jeans, receive 50% off a shirt.” Shopify notes that as of 2019, customers were 1.8x more likely to place an order if they had an automatic discount. Not only that, but they placed the order faster — a huge indicator that customer psyche is easily influenced by these types of promos.
Don’t Discount Your Brand; Contact Full Fat Commerce
While discounts and offers can boost your e-commerce storefront to the next level on Shopify, sometimes the biggest boosts need a bit more work. Full Fat Commerce creates landing pages for hot new products and designs promotional assets like banners and ads for when you want your promotions to truly generate a profit. Contact us today to revamp your website and perfect the buying experience. Our developmental and design teams put growth first, optimising conversion rate, site speed, search engine population, mobile storefronts, and more. The best way to run promotions is on a site that already attracts the most visitors possible; let us give you a hand.