Discounts are something everybody uses, especially when you want people to buy a certain product. Discounts are everywhere, and you have probably noticed there are a lot of different ways to give that discount. In this article, we’ll go into the psychology of discounts and what kind of discounts work best for most people. But let me start by explaining why discounts work in the first place.
Why do discounts work?
Most discounts work on the principle of urgency, as the discounts are only available for a specific period of time. If people don’t buy the product now, at the discounted price, they’re likely to miss out on saving some money. There is urgency involved. That anticipation of missing out is exactly why discounts work.
Duration of the discount
Unfortunately, I couldn’t find a lot of research or posts done on the duration of promotions or discounts. Personally, I’d not leave a sale or promotion period running longer than a couple of weeks. If the period lasts longer than that, you’re risking negating the urgency principle.
Think about how long you’d want the discount to last. And make sure you communicate this clearly to your potential customers. If you have an actual sales force it’s mentioned that a maximum of 6 weeks for a promotion is more than long enough. Apparently, employees can’t (or won’t) focus on a promotion after 6 weeks. However, I think 6 weeks is pretty long, especially for online shops. That probably covers a number of holidays (a.k.a. sales opportunities), right?
Pros and cons to discounts
After all this information, I feel compelled to give you some pros and cons to discounts. The con I have to discounts is pretty simply: don’t overuse discounts. Our good friend Chris Lema is actually completely against them, saying discounts just don’t work. While we reserve a somewhat more moderate opinion for ourselves, we do completely understand where he’s coming from.
There’s a risk to (back-to-back) discounts. The risk that people get used to not paying full price in your store. That’s why I’m telling you to be careful with discounts. Don’t give away discounts too regularly or too often. Especially if you’re offering a single service or just a few products (as we do), discounts could backfire on your overall sales. Think about why you should give a discount on which product. And when.
Obviously, discounts have a major benefit as well: discounts will attract new customers. Giving people a discount might just be the thing to draw them in and become your customer. And new customers mean new opportunities for cross-sells and upsells, meaning more revenue in the long run as well.
Discounts for existing customers
Discounts are not only a way to acquire new customers, they’re also a way to show your gratitude to your existing customers. What better way to show that gratitude to your most valuable customers than to give them a discount. Giving discounts can come in the form of sending your best clients a free product, a discount code or whatever else you can think of.