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Applying discounts in your pricing strategy

It seems that every time you visit an online store there is some sort of discount, coupon or promotion going on, but how do you know what is right for your online store? It depends on what you hope to accomplish with your offer.

Discounts can be offered for a wide variety of reasons, ranging from providing a boost to a slow sales cycle to helping to grow your social media network (more on that in a bit). Before slapping on that discount, be sure there is a real reason for offering it beyond “that’s what everyone else does”. Making changes to your pricing will have a significant effect on your online business, and such changes should always be part of a larger strategy.

Touching on that “larger pricing strategy“, let us get back to the social media angle and outline how that can tie in to your discount campaign. You have a Facebook page and you update it regularly, but how active is your page beyond your updates. Facebook “Likes” are important, but you also want to see some real activity going on from all those people that “Like” you. This is where a discount offer can make a difference.

Here are a few examples of how that can play out:

–          You put up an interstitial (popup) on your website offering a discount, however in order to “activate” the discount, the customer first needs to “Like” your Facebook page. Bear in mind that the offer needs to be compelling enough that people will be willing to take an extra step to get it. This method can be useful to help grow your base.

–          You offer a variable discount, tied to either a specific time or benchmark of your choosing. You send out the information that there is a discount, but the details and updates are only posted on Facebook (and/or Twitter). This can be an effective tool to ensure that your Social Media outlets are actually read and shared, helping to create that activity we mentioned previously.  It is important to note that for this particular example, you need an established Social Media base in order for this to be effective.  

In the above examples, the discount is part of a larger strategy of growing your fan base and fostering a social media environment that is active and dynamic. Discounts will generally always bring more sales (assuming your product is something people want), and if that is all you are looking to accomplish, you may be missing some tremendous growth opportunities. Your discount may get the customer to make a purchase, but what you really want are returning customers. A strategy to increase the likelihood of returning customers is to ship your order with a discount code or coupon they can use with their next purchase.

Ideally, you should be doing everything possible to give your discount offer maximum exposure – you obviously want as many people seeing it as possible and this is where some advance planning about your actual discount is important.  The following questions can help give you an idea of some of the things to keep in mind when planning your discount campaign. What happens if you reach more people than you intended? Can you afford to reprice and sell your entire stock of the product at your discounted price? Can your site handle the extra traffic? Will you be able to keep up with your “regular” orders while your discount campaign is ongoing?

Proper planning will ensure that your business continues to operate smoothly while you reap the benefits of your campaign. You cannot create a discount that is both affordable to your business, and attractive enough to entice a purchase without having a constant awareness of real-time market pricing conditions. To learn more about effectively gathering such data, please feel free to comment with your feedback and get in touch with us here at Wiser.

Arie Shpanya

Arie is the former COO, Executive Chairman, and Co-Founder of Wiser, a dynamic pricing and merchandising engine for online retailers and brands. He has extensive experience in business development with a focus on eCommerce (eBay and Amazon), and is a guest blogger on Econsultancy, VentureBeat, and more.

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