The Art of Dynamic Discounting – A Conversational Trading Strategy

Discounts are undoubtedly the most effective tool used by retailers both offline and online to drive demand and increase sales.

Come Black Friday, half of your email subject lines will be the word “Discount.”

We all love a discount, don’t we?

We also love a personalized experience because it makes us feel special and valued.

However, the discounting strategies used by most retailers today still follow the old playbook of pushing one-size-fits-all promotions to their customers.

Traditional methods like discounting don’t mesh well with retailers’ personalization strategies in today’s post-COVID markets.

In addition to a lack of personalization, they are inefficient, reduce profit margins, and are even prone to fraud.

Enter Dynamic Discounting, where retailers set different discounts for each customer based on multiple factors.

If you’ve ever booked an airline ticket, you can taste this innovative treat.

The art of dynamic discounting was popularized by the airline industry and is now practiced by the markets’ top retailers.

Benefits of Dynamic Discounting for Online Retailers

  • Saves you from unnecessary discounts. It’s fine to give a big discount, but not to every customer. Some customers who already trust your brand don’t need discounts to buy your products. Using your customer data, you can make smart decisions about who should and shouldn’t be discounted. Ultimately, this helps you earn more profit from the same amount of sales.
  • Optimized stock turnover for retailers dealing with soon-to-expire products. Instead of setting a lower price tag near maturity, they can gradually lower the price based on customers’ willingness to pay. This type of tiered pricing allows customers to choose between a longer term and total price and a lower cost of using an expired item.
  • Better manage demand fluctuations Demand for a product can vary greatly depending on the time of purchase—time of day, week, month, or year. For example, Christmas gifts are in high demand in December.

With the help of dynamic discounting, retailers can offer high-demand products at much lower prices during the off-season. Many customers are willing to buy something early, even if they won’t need it for a while, in hopes of getting it at a lower price.

  • Personalized customer experience and increased brand loyalty The most successful retailers build strong relationships with their customers. This includes learning more about them, their preferences and talking to them directly. If your local grocery store offers extra discounts to repeat customers, why should you give everyone the same discount?

Making dynamic discounts a key part of your customer personalization strategy creates a stronger bond and instills brand loyalty.

8 Examples of Brands Maximizing Their Advertising Dollars with Dynamic Discounting

Below, we’ll highlight some interesting examples of online retailers using dynamic discounting techniques to create personalized pricing experiences for their customers, increase sales, and drive brand loyalty.

Lufthansa Airlines Moves to ‘Continuous Pricing Model’

We’ll start this list with an example of an airline that uses data science to power its dynamic pricing strategy, calling it the continuous pricing model.

As Lufthansa Group’s Head of Revenue Management Pricing Simon Rimrod explains, the core logic of their continuous pricing model is to make a price point affordable to a certain segment of customers as they see fit. In this interview, he says that continuous pricing is something the company needs in the long run, in addition to being helpful in fighting the COVID-19 pandemic.

Uber is making dynamic fares standard across app-based taxi services

Uber’s dynamic pricing strategy has undoubtedly been an important driver of its success.

Uber uses a proprietary dynamic pricing algorithm that adjusts fares based on several factors, such as ride length, reservation time, traffic, and driver demand.

So Uber can offer very cheap rides for a particular trip and steeper fares during peak demand. You can learn more about Uber’s dynamic pricing here.

Amazon Nails Dynamic Discounting for a Dynamic Market

Amazon uses dynamic pricing to its advantage, adjusting product prices at the same rapid pace as market demand changes. They leverage customer data and advance data science technologies and Machine Learning like no other retailer. Their advanced algorithms can analyze data, see patterns, and develop real-time discounts that customers can’t say no to. This, combined with their product recommendation engine, maximizes the average car value.

Airbnb’s Smart Pricing feature allows hosts to get more out of their properties

Airbnb offers a smart pricing feature to its hosts that can automatically adjust listing prices based on several variables such as rental type, season, demand and location when enabled. Hosts control the minimum and maximum prices between which a listing can vary. Many hosts have taken advantage of this dynamic pricing feature and increased their net income.

If the host is not satisfied with the results, they can always disable the feature.

Birchbox uses discounts as an incentive to recover cart abandoners

Birchbox, a New York-based monthly cosmetics subscription provider, makes heavy use of cart abandonment-discount offer emails to convert lost customer visits. It’s important to use the discount carefully, as customers may start to anticipate it and intentionally not convert during their site visits.

H&M rewards loyal customers with discount codes

H&M runs a rewards program for its Club members where they offer personalized discounts to their customers based on their purchase history. Coupon codes come with an expiration date to compel users to take action. The value of the discount depends on the number of reward points earned.

The savings engine lowers prices as you shop

A key differentiator for and one of the reasons it acquired Walmart is its real-time savings engine, which lowers product prices as customers buy more items. With this unique dynamic discount feature, they can get customers to build bigger carts to pay less. Others offer discounts if the customer opts out of free returns or pays with a debit card instead of credit.

Mariott will offer more deals in the off-season

Marriott Hotels is making significant changes to how its Bonvoy loyalty members pay for award nights with points. Starting in September 2019, they introduced a dynamic pricing model that sets prices as a function of demand. In the off-peak season, Bonvoy users will be able to get more discounts on the properties they view. Mariott’s move is in line with the global travel industry trend of creating dynamic discounts right in their loyalty programs.

Accept dynamic discounts in this dynamic market

The examples above make it abundantly clear that the concept of dynamic discounting and pricing is here to stay and will only become more sophisticated and pervasive across markets.

The question is whether or not you, as an online retailer, are willing to make it part of your discount strategy.

A one-size-fits-all approach to pricing and discounting will deliver suboptimal results and may even harm your brand.

While we understand that implementing dynamic discounts can be intimidating, we also believe it’s never been easier.

Thanks to significant advances in machine learning, AI and data science, the technologies and systems needed to create dynamic discounts are more accessible than ever.

At, we’ve enabled brands like Unilever, Disney, Samsung, Loreal and many more to offer personalized conversational commerce experiences across social, messaging and the web.

The ability to offer dynamic discounts across various conversational touchpoints like WhatsApp, Facebook Messenger, iMessage, SMS, Twitter and many more is a key feature of our enterprise-grade shopper engagement platform.

Your willingness and our ability to implement a dynamic technology-driven discount strategy, when combined, will be a key driver of your growth and success.

We’re happy to show you how. Simply book your personalized showing here.