Discounts Driving Profits

One of the most effective methods retailers use to boost sales and customer engagement is by offering discounts on their products.

In fact, a Software Advice study found that discounting is the most popular retail pricing strategy of all, with 97 percent of survey respondents stating that they utilize discount pricing.

However, without a carefully calculated discount plan in place, you could actually wind up slashing profits, bringing in too many low-value buyers, and even hurting your brand integrity.

Therefore, it is imperative to know how to implement a discount strategy the right way. This guide will shed light on the key discounting tactics that will put your business in the best position to increase transactions and grow your customer base.

1. Set Goals: What Should Discounting Accomplish?

Prior to choosing your discount strategy, make sure that your end goal is clearly defined. Some examples include:

Customer Acquisition

Discounts are a great way to incentivize consumers who have never bought from your brand before. With less to lose on their end, they’re more likely to give your products a shot. Plus, if they’re satisfied with their purchase, they’re officially on your radar and are more likely to purchase again.

Limited time and/or storewide offers are also particularly effective in this case. Adding a sense of urgency serves as a motivating factor to buy sooner rather than later, and not limiting the scope of the sale will draw in more people.

Incite a Second Purchase/Customer Retention

Most of the buyers you work so hard to acquire only buy from you once. These are known as one-time buyers, who do not provide an ROI that is substantial enough to grow your business.

In turn, a discount enticing a buyer into a second purchase can provide a substantial payoff – particularly since many statistics show that it is at least 5 times more difficult to acquire a new customer than it is to retain one.

Additionally, it is very important to keep a close eye on your margins and Customer Acquisition Cost (CAC) as you apply discount tactics and strategies.

Reactivate Fading Customers

Design your discount offers to solely reach inactive or fading customers, instead of your Most Valuable Buyers (MVBs). If your data indicates that someone hasn’t bought from you in a while, a timely, personalized discount offer could be the difference between winning them back and losing them forever.

Reward Loyal Customers

Send a special discount for your product or service to reward your MVBs for their loyalty and incentivize them to make further repeat purchases. Research has shown that discounts and coupons are the top-ranking tactic for driving loyalty with 61% of consumers saying they use them.

2. Segment Your Customer Base [Know Who to Discount to and When]

By segmenting your customers into groups, you can customize your discounts based on their respective buying tendencies and purchase history. 

Each of these can provide actionable information about your customers’ lifestyles, lifestages, incomes, interests, and the probability that they will buy from you again.

Equipped with a Predictive Marketing Automation (PMA) platform, you could send timely, personalized discount offers to the right person, at the right place, at the right time.

For example, if you sell furniture, kitchen appliances, roofing, or landscaping products, you have the ability to send discounts to people you know for a fact is a new/prospective homeowner – and is therefore much more likely to respond to the sale. 

Create Reference Tables

Reference tables are built from the various types of transaction codes used to track retail or online sales in POS systems. These typically include customer data, transaction data, and product data.

For example, if a buyer enters a furniture store and purchases a couch on clearance (where the price has been dramatically reduced), that particular item would have a special transaction code indicating the markdown in price.

This simple set of information can be used to form a clearer buyer profiles. For instance, if the person who bought the couch also purchased other items on sale (either that same day or over a longer period of time) he/she could be categorized as a discount buyer.

3. Test Multiple Discount Tactics and Campaigns

There are a wide range of types of discounts you can use, so be sure to pick the kind of discount that best fits your overall goal and your target customers.

Examples include:


Instead of dropping the price of one product in particular, you can lower the price of specified group of items bought together.

This increases the number of items you sell, which means more revenue per order and less costs to package and ship each order if you work in e-commerce.

Seasonal/Special Event

Two common discount strategies revolve around holiday and seasonal sales. For instance, the automotive industry takes advantage of most holidays (i.e. President’s Day, Memorial Day, Labor Day) as catalysts to drive consumers into their showrooms.

Purchase Volume

In this case, buyers will pay less overall for a particular item if they buy a larger amount. This encourages them to purchase a greater number of units per order, while also spending more than they initially would have if they simply bought one of the items on its own.  

This is also an excellent tactic if you are looking to make room for more inventory or heighten the average profit of each order.

Free Shipping

Offering free shipping can be yet another way to persuade a customer to purchase and increase overall sales.

Since a downside of free shipping is increased packaging and delivery costs on your end, a solid way to cover your bases is by only offering free shipping when a customer spends a certain amount (like $35). 

This can actually entice buyers to spend more on your site on other items simply to cross the free shipping threshold.

Buy One, Get One Free

There are instances when a single discount on its own isn’t enough to draw in a sale. It’s no secret that most shoppers would prefer to receive an item that is “free” rather than at a discounted price.

An effective way to do this is by pairing a popular more expensive product along with a free one that is either less expensive or hasn’t sold as well.

Cross Sell/Upsell

Since discounts bring more people into your store (whether brick and mortar or virtual), they offer great opportunities to cross sell or upsell additional products in either the same or a similar category.

When certain items are on sale, tailor suggestions that would either complement or supplement each respective product. For some buyers, as long as they’re getting a deal on one item, they won’t mind paying full price for another related one.


There are a variety of effective methods to use discounts to your advantage. You can acquire new customers, generate more revenue from your existing customer base, enhance loyalty, and serve as the difference maker that sways buyers away from your competition.

Following and enacting the steps and tactics listed above will help maximize both the value and utility of your discount practices. This ensures that your discount campaigns will serve (rather than stifle) your business goals and increase the overall potential for further growth and success down the road.