Discounts can make you or break you in the online world. The right discounts can increase your revenue, while discounts that are used incorrectly can backfire and actually decrease your revenue.
This is why your first step in using discounts is to understand how they affect your business.
In this article, you will learn about the different types of discounts and how to use them to increase your revenue.
What Is a Discount?
A discount is a reduction in the price of an item that a retailer or a business offers to the consumer.
Why would businesses offer discounts? There are three main reasons to discount your products.
- To increase the volume of your sales.
- To increase the average selling price of your products.
- To increase the number of sales from each sale.
Types of Discounts
Discounts can be categorised according to how long the discount is offered for, how the discount is applied and the reasoning behind the discount.
Periodic – Deals that are set to expire at a certain date. These may be offered for a fixed length of time or until a certain point in sales has been reached.
Fixed – Deals that are set to expire at a certain time of the year or when a certain volume of sales has been reached. These may be set to either a percentage or a fixed amount of sales.
Variable – Deals that are set to expire based on the mood of the salesperson or when a certain amount of time has passed.
How to Use Discounts in Your Business
Offer deals that contain different types of discounts and apply the appropriate type to maximise your revenue.
Periodic Discounts: Periodic discounts are ideal for deals that are set to expire at a certain date. Using this type of discount allows you to increase your revenue by pushing out the sales cycle and increasing your average order value.
Fixed Discounts: Fixed discounts are ideal for deals that are set to expire at a certain time of the year or when a certain volume of sales has been reached. This type of discount is fixed in duration and amount and can help you stay focused on your revenue goals.
Variable Discounts: Variable discounts are ideal for deals that are set to expire based on the mood of the salesperson or when a certain amount of time has passed. This type of discount allows you to increase your revenue by increasing the average order value while decreasing your average order value makes it more difficult to achieve revenue milestones.
How to Use Psychological Pricing in Your Business
Psychological pricing is the art of setting a price that is higher than the actual market value of your product so that you can gain an advantage over your competitors.
Identify your competitors: The first step to using psychological pricing is to identify your competitors in the marketplace. You can do this by looking at similar products that your competitors sell and looking at how much they are charging. From there, you can use what’s called the rule of 100 to estimate what your competitors are charging.
Set your price: Once you have identified your competitors’ average selling prices, you can use that to set your own price. While this may seem counterintuitive, setting a high price allows you to gain an advantage over your competitors by offering a cheaper alternative that may still be of high quality.
Make Sure You Are Only Discounting What Customers Want
You can’t discount what you don’t sell. Before you start offering discounts, you’ll want to make sure you understand what your product is and how it is being used.
Know your product: Before you start offering discounts on your products, you’ll want to know as much about your product as possible. What is it used for? How much does it cost? What are its benefits?
Know your customers: As with any sale, you’ll want to make sure you are selling to the right people. You can do this by getting to know your ideal customer and their needs and wants. By understanding your customer, you will be better able to pinpoint what they are looking for and provide it to them at a discount.
Discounts can be a great way to increase your ecommerce revenue, but you have to use them wisely. You have to pick the right type of discount for your product and make sure you’re only discounting what your customers want.
If you do, you can increase your revenue while also increasing the average order value of your products and increasing your profits overall.