February 20, 2021

Which Discount Pricing Strategies can you utilize in your eCommerce Shop?

As someone who works in sales, I am very much aware of the power of discount pricing strategies. That said, even when I am in the role of the consumer and buying things for myself it is very difficult not to succumb to the allure of discounted products.

After all, everyone loves a “bargain”, don’t they?

As matter of fact, a few days ago I needed to buy a new dishwasher. I was super excited about the fact that it was Black Friday. Before I went shopping I had an idea (or at least I thought I did) of the specifics and the brand I wanted to buy. But then something interesting happened.

Instead of buying the brand I would usually buy for my household needs. I ended up buying the brand that had the highest difference between the regular and the discounted price. After I had bought the dishwasher, I started to wonder about my buying behavior.

As I mentioned before, just because I work in sales, doesn’t necessarily make me less susceptible to these tactics. In this particular case, what convinced me was the value of discount I got.

The brand I had wanted to buy initially was discounted by 80 euros, whereas the other brand I bought was discounted by 120 euros.

Funnily enough, my friend who was with me when I bought the new dishwasher even commented that I was being irrational. Was I really?

I don’t know – maybe, but I still think I got a pretty good deal. True, I ended up paying more than I had originally wanted but hopefully I got a superior product.

The lesson here is clear. Discounting can be a very powerful tool because it overrules the customer’s doubts and gives them the feeling that they are getting a good deal.

Before I continue and introduce some of the discount pricing strategies I just wanted to highlight that whenever you decide to offer discounts be careful and smart about it. In other words, define the strategy behind the discounted price. Why is this important?

Short term gain but long term pain

Well, you probably don’t want to condition your customers to never again buy products at full price. I think we all know some of the online platforms (I won’t name them) where you get discounts every second week.

This can have a seriously negative impact on your brand/shop. When your buyers get discounts all the time, they subconsciously assume your product is not worth the regular price.

So, unless your business model is to generate sales with constant discounts, you probably want to avoid this.

You should be smart with the frequency of offered discounts, as well as the amount of the discount. I personally think any discount above 55% will significantly decrease your chance of selling products at full price, later on.

Now, let’s talk about some of the discount pricing strategies you can use in your online store

1. Follow the “Rule of 100”

How do you maximize the perceived size of discount? This is important as you want to give the customer the feeling that they are getting the best deal in your ecommerce shop.

One way you can achieve this is by utilizing Jonah Berger’s (2013) “Rule of 100”. Basically, this rule suggests playing around with the absolute vs relative value of discount.

In other words, give a percentage discount when the price is below $100 and give an absolute discount when the price is above $100. For example, let’s say you want to give a 20% discount.

If you are selling a product which cost $30, then 20% off looks much better than $6 off, but if you are selling a $300 product then it is better to promote $60 off than 20% off.

Next time you have a special offer you can try and apply this formula to your pricing strategy to see what results it will bring to your eCommerce shop.

2. Use price anchoring

Price anchoring refers to the practice of establishing the price point to which customers can refer to when she or he is making a decision of buying a product. What does this actually mean?

There has been a lot of research about the price the customers first see in relation to your product and its effect on the perception of all future prices.

The customer buying process usually includes valuing prices of different products/services. In order to be sure the final decision is the right one. So, if you have a special offer in your shop you can utilize a pricing anchor by not only promoting the discounted price but as well as displaying the regular price.

Let’s say you want to make a discounted price look like a great bargain. What you can do is the following. First show the original price and then the discounted price.

Furthermore, if you want to make the discounted price even more enticing you can play around with the size of the fonts. Put a discount price in a bigger font size and the regular price in a smaller font size. The latter will give the illusion of making the discount look bigger than it is.

3. Put expiration dates and a countdown timer on the special offers

Putting a countdown timer next to the products which have been discounted. Or, also on the homepage banner is a great tactic to increase a sense of urgency.

The fear of missing out on the great offer is a great way to pressure customers into making a purchasing decision.

Countdown timers are a visually clear way to tell customers that if they want a certain product for a discounted price, they need to take action within a specified time period.

There have been many A/B tests which have showed the gain in conversion rates when a countdown timer was implemented with discounted prices.

However, a countdown timer can be even more effective when used together with an email or other campaign. You can incorporate these into your email campaigns when the timer shows the amount of time left to take advantage of the discounted price.

These are the three discount pricing strategies that I wanted to share with you. Make sure you try them the next time you are running some special promotion in your eCommerce shop.

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  1. Klara February 27, 2021 at 8:34 pm - Reply

    I am learning a lot from this especially the 100 rule parto!

  2. Maya April 2, 2021 at 12:59 pm - Reply

    Thanks Klara – great to hear this 🙂

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