The e-commerce brand’s guide to smart discounts

It should come as no surprise to retailers that the consumer of 2023 is a completely different consumer than those of years past.

For one thing, the evolving economic landscape consistently requires customers to shift their priorities. (Those new sneakers? They can probably wait until egg prices come down.) Then there’s also the element of consumers wanting “more” from their retail journeys. More personalization and positive, seamless experiences.

For e-commerce brands, this means that finding the right balance between meeting consumer expectations and maintaining a healthy bottom line will be vital now and in the future. One way to ensure a long, healthy brand life. Smart discounts.

But don’t constant discounts devalue the product and hamper overall revenue? Not so long as it’s done smartly.

In this post, we’re going to dive deep into the 2023 consumer, smart vs. dumb discounts, and best practices for driving sales and adding value.

2023 consumer profile. What to expect?

Price conscious

As we enter 2023, many online shoppers will take a little bit of 2022 with them. The average amount of debt per US consumer has increased by a whopping 24%, allowing many consumers to pay off their debt immediately.

And with continued inflation, this affects overall spending power and consumer behavior. From January 2023 to February 2023, the consumer price index (CPI) increased by 0.5%, bringing annual growth to 6.4%.

For 2023 consumers, the emphasis on cost savings will increase. A Deloitte report found that 60% of retail industry leaders expect price to be the most important factor, even ahead of brand loyalty.

Based on experience

The retailers who will be at the top in 2023 will be those who create the best experience for their customers. We’re talking about frictionless, personalized, meaningful brand interactions at every touchpoint.

Because if customers spend their hard-earned savings with a brand during financially turbulent times, they will expect above-average experiences. In fact, over 50% of consumers will abandon a brand after just one bad customer experience.

There are almost endless opportunities in e-commerce to improve the customer experience. Positive experiences can look like this:

  • Optimized earnings
  • 24/7 customer support
  • Personalized product recommendations
  • Personalized discounts
  • Loyalty programs

More economical and selective

There is no way around it; The consumer of 2023 has fully evolved. They are more aware of advertising and marketing, they spend more time researching brands and products before buying, and they are always looking for a good deal to spend less and save more.

All this said, consumers in 2023 are less likely to pay full price for products. Often it’s just out of necessity. In an uncertain economy, they will likely have their favorite types of discounts and will want to know what your brand has to offer.

To stay ahead of the game and drive more sales, retailers should already have a smart discount strategy in place for 2023 and beyond.

What is Smart Discount??

Smart discounting is a strategy where businesses offer discounts designed to increase customer lifetime value (CLV) and brand loyalty, rather than simply to clear inventory and increase short-term sales. For example, a brand might present a customer with 10% off their total purchase as long as they spend over $50. In this way, the brand achieves a higher average order value while taking into account consumer preferences for cost savings.

The most common types of discounts in e-commerce

Percentage discount

alo ad for cyber monday deals.

Percentage discounts attract both new and returning customers. Usually, they are only offered for a limited time to promote scarcity. Customers will have a certain period during which they can purchase products at a discounted rate.

BOGO (Buy One Get One)

Solwave Christmas Sale Buy One Get One Free Wand!

The buy one, get one discount is perfect for brands that have a lot of excess inventory that needs to be moved out of the warehouse. Alternatively, this type of discount can be useful for brands that want to test new products.

Threshold discounts

AliExpress Sale $10 off orders over $100.

Threshold discount can only be redeemed when the customer reaches a certain order value. In the example above, the customer would have to spend $100 to get the $10 discount. These types of discounts are great for encouraging higher spending overall. Additionally, they can work well for brands that want to offer free shipping but avoid shipping costs for small orders.

Re-engagement discounts

RedBubble retargeting email for 10 percent off reorders.

Re-engagement promotions are designed to target customers who have gone dormant. Typically, it includes a compelling offer that kills two birds with one stone, increasing CLV while bringing the customer back to business.

The problem of “dumb discounts”.

“Stupid” discounts are more common than you might think. Many brands are not very strategic about discounting items, hence the term “dumb”.

These types of discounts only focus on short-term profits, not long-term value. For example, if a brand continuously has a “limited time offer, 50% off” discount, several things can happen.

1) Customers may lose confidence in the authenticity of a brand’s “limited time” discount if it happens so often.

2) Exceeding the amount of this discount can turn customers away from making impulse purchases, especially if they believe the brand will have another sale sooner.

Alternatively, a brand that offers a BOGO deal without any implications or meaningful touchpoints to the repurchase experience may encourage opportunistic shoppers who only visit the store once, hurting overall CLV.

Smart discounts. tips for success

Don’t overdo the discounts

As we mentioned above, it is better to have few discounts. Constantly selling inventory at a discount can backfire on merchants, devalue products, and hurt overall revenue. Brands must strategize how they discount their products to remain profitable by:

  • Offer discounts only occasionally rather than every week (if consumers always expect discounts, they won’t feel the need to take action)
  • setting a threshold for
  • What must customers spend to be eligible for the promotion?
  • Only discount products at the very beginning of their shelf life (ie early bird specials or new product sales)

Reward your most loyal customers

Remember the 80/20 rule? 80% of sales come from 20% of customers. With this fact in mind, adding a loyalty program to your business model can be beneficial for smart discounts.

Loyalty programs are reserved for your most engaged customers and can include exclusive discounts, early access to sales, product samples, and more. This ensures that only a select number of customers will receive benefits such as discounted prices or free shipping, saving on the costs your brand has to pay upfront.

Additionally, loyalty programs pave the way for referral discounts for friends and family. These types of discounts are powerful in that they come from an army of your brand advocates who are likely to decide who they share their referral discount with. Your busiest customers can grow your audience and increase sales as long as you give them enough love and give them the tools to do so.

Target different customers with unique promotions

By now, it’s no surprise that personalization during the purchase journey is the new normal. In fact, research shows that companies with better personalization strategies generate 40% more revenue than those without.

Personalization should not be forgotten when it comes to discounts and promotions. A smart discount through personalization can look like this:

  • First purchase offers for new customers
  • Birthday/customer anniversary discounts (ie consistent purchases from the brand require a little surprise).
  • Recapture customers who have been inactive for a certain period of time

After all, if a customer comes across an ad that’s targeted to them based on where they are in the purchase journey, they’re more likely to engage.

Consider the season

Seasonality makes no sense for discounts. The holidays are always swimming in sales, and even in the post-holiday season, there are brands promoting discounted items to get inventory out of stock.

Brands that take a unique and strategic approach are more likely to benefit from this type of discount. For example, a swimwear brand might want to have a limited-time “early bird” sale well before the first hot summer months. Or, a children’s clothing brand may present a special discount code to mothers on Mother’s Day.

Regardless of the occasion or season, the goal is for brands to not just jump in, but rather take their own approach to seasonal sales. So their customers will still have that consistent brand experience.

What is the right discount strategy for my brand??

Smart discounts will look different for each brand. But what it looks like is creating the biggest discount possible and pushing it on your customers.

Instead, being “smart” with your ads will depend on many factors, such as your audience, your product, your sales channels, and more. One thing is certain. With a strategic approach to discounting discounts, your promotions are sure to result in more sales, more loyalty, and more engaged customers without the financial burden.




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