Discounts ruin your brand.
Slashing prices damages profitability, hurts marketing ROI, and positions you as a discount seller. Not good.
Today, you’ll learn why to say no to discounts and what to do instead.
Let’s get started!
Editor’s note: This is one of many articles we’ve written about smarter sales strategy for eCommerce stores. Want insight tailored to your company’s unique challenges? Get in touch.
The case against discounting
If you’re reading this article, you probably rely on at least one discount to bring in new customers.
And it’s true—low prices are an effective sales promotion strategy to boost conversions. But they’re a problem for a few reasons.
Discounts hurt your brand image
There’s a reason the word “cheap” means both “inexpensive” and “low-quality.”
A 2018 study published in the International Journal of Interdisciplinary Research showed that the bigger the discount, the lower the perceived quality.
Discounts attract the worst customers
Brand-conscious customers stick with you over the long term, but price-conscious customers leave as soon as they find a better deal.
Discounts erode consumer trust
About a year ago, my sister bought jewelry from a company that offered her not one, not two, but three discount codes during the checkout process. Her main comment about the experience? “They must be really desperate.”
Confident brands don’t need to cut prices to push inventory. Discounts are a sign of desperation.
Discounts need to keep growing
Discounting has inflation. If you start offering a 10% discount, customers will get used to it. To get the same result, you’ll need to offer 15% off, then 25%. That’s why major discounters often have 45% or even 50% discounts—it’s the only way to get the customer’s attention.
There’s no prize for being second-cheapest
If your competitive difference depends on being the most affordable, you’re probably in a losing game.
That’s because you’ve built a user base around customers who demand low prices. And if another store can undercut your prices, you’ll lose your customer base. It’s called predatory pricing, and it happens often enough to have its own Wikipedia page.
Once you start discounting, you can’t stop
Once your consumers expect discounts, you often can’t eliminate them.
Take the case of JCPenney. In 2012, the company brought on a new CEO who discovered that three-quarters (!) of the brand’s products sold for under 50% (!) of list price.
He declared no more discounts, just a “Fair and Square” low price every day.
The result by the end of the 2012 fourth quarter?
And in 2013, the board fired the CEO and announced they would be “restoring initial markups” to return to a “promotional department store strategy.”
If you build a brand on discounts, you might never be able to stop.
But what about Walmart?
Whenever we talk about discounts, the question always comes up—but what about Walmart, Amazon, or the other retailers who focus on low prices?
First, Amazon and Walmart build their empires on everyday low prices, not one-off discounts. There’s a difference.
Second, these brands don’t offer as low of prices as you might think. In Cheap: The High Cost of Discount Culture, Ellen Ruppel Shell cites a 21-year study of Walmart’s prices that found the retailer actually has higher-than-average prices on one-third of its stock. Walmart customers only save an average of 37 cents on low-priced items and two cents or less on one-third of those products.
Third, winning big on low prices requires years of sacrifice. Sam Walton took 14 years between opening his first store and his second. Amazon’s profits lingered at (or below) zero for decades.
If low prices aren’t your main marketing strategy, beware. And unless you’re confident you can undercut Amazon and Walmart, don’t try.
How to say no to discounts at your eCommerce store
Here are some of the best principles you can implement at your store to stop cutting prices once and for all.
Build a brand
Everyone says “build a brand,” but what does that even mean?
Quite simply, a brand focuses on a single thing it can do better than any other company in the world. Unless that single thing is “offer low prices,” a discount brand doesn’t create a reason to buy.
Sell a unique product
The single best way to get out of the discount game is to offer something nobody else has.
Of course, your competitors can copy any product. But there are a thousand ways to differentiate yourself. Make a more durable product. One with a sleeker design. With more features. A more intuitive interface. Made from ethical materials or luxury ones. That’s custom and personalized. That’s bigger or smaller, lighter or heavier, or whatever your customer is willing to pay extra for.
Offer a unique service
The difference doesn’t have to be a product.
Nordstrom doesn’t sell many unique products, but it excels in customer service. Amazon itself didn’t start as the cheapest bookseller but the one with the largest selection.
Use profitable promotions
There are plenty of ways to reward customers and set your pricing apart without resorting to discounts. See our guide to profitable promotions for plenty of ideas.
How to use discounts correctly
While it’s best to go with no discounts, it’s not a binary choice.
Your store might still launch promotions for Black Friday/Cyber Monday and perhaps during other key moments of the year.
If that’s the case with your industry, store, customer, or marketing strategy, there are at least a few ways to make your discount more effective.
Don’t over-list the sticker price
The difference between the listed and selling prices should be enough to encourage buying behavior but low enough to seem reasonable.
Give a reason
Make there be a reason for the discount, particularly one tied to time. This increases scarcity and answers the two unspoken consumer questions—why is there a discount now, and will the next one be even better?
Show that someone is paying
One of the best copywriting techniques for a discount is to say, “we’ll cover the cost.” This implies that the product is still worth what you’re offering but that you’re paying for part of it to help the consumer.
Establish the expected price
If you offer a discount, you need to be sure you’re attracting customers ready to pay the real price. Offering a discount on a second item or giving a low percentage off, you can make sure you’re attracting customers willing to pay real prices.
Don’t sell products at a loss to acquire customers only to realize those customers only have the budget for products that make you lose money.
How to set your brand apart without discounts
There’s another way to set your brand apart that works perfectly with a “no discount” policy—education.
If you can show your potential customers they can trust you, you can charge a fair price that’s based on your true value.
Want to see how you can use education as a powerful way to attract customers? Send us a message.