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Why Discount Codes Might Be Hurting Your Business — and 6 Things to Do Instead

There are smart strategies that boost sales without encouraging your customers to rely on discounts. Here are just six of those strategies and brands that have made them work.

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These days, most consumers automatically shop around for a discount code before they make an online purchase — and it usually only takes them a few minutes to find one. Discount codes are effective pricing strategies in the world of eCommerce, with influencers and sites like RetailMeNot increasing their accessibility more than ever.

Unfortunately, discounts can create a damaging sales cycle for many eCommerce brands. In fact, running any type of sale too frequently can place undue emphasis on costs, create pricing wars with competitors, devalue services and lead to other negative consequences.

According to a report by McKinsey & Company, pricing is one of the most important factors for business success. The most effective pricing strategy can even boost sales by up to 7 percent. How can eCommerce brands optimize their pricing and convert customers without offering discount codes? Here we will explore six promising alternatives.

1. Limited-Time Products and Flash Sales

Discount codes work in part because they create a sense of urgency. Customers want to act quickly, before the product goes back up to full price. But, it is possible to create that same sense of urgency without cutting into your profits. How? By offering limited-time products and flash sales.

These promotions generate a sense of urgency and exclusivity. Because a product is only around for a short time, a smaller amount of customers will get in on the deal. Customers who do score the product can feel excitement and pride in owning a product that no one else has access to, and it can increase their loyalty to the brand.

Kylie Cosmetics offers a great example of limited-time bundles associated with holidays and seasons. The Valentine’s collection bundle is only available for a short time, and every product is limited-edition. Likewise, Starbucks is well-versed in offering limited-time products. Its “Unicorn Frappuccino” made a huge splash in the media, even though it was only available for a few days.

2. Transparent Pricing

One of the biggest problems with discount codes is that they permanently devalue a product. If a customer knows you are almost always hosting a sale, they will never want to pay full price. In fact, they will be inclined to believe your product is not even worth the full price.

You can convince your customers your product is worth the full price tag by being more transparent about your prices. If you break down your margins and explain exactly why a product costs what it does, customers will have more trust in your brand. They will believe your product is appropriately priced and is unlikely to get any lower. And, they will stop waiting around for a coupon code.

Companies like Everlane have paved the way for the transparent pricing trend, gathering a loyal consumer base around their “radical transparency” manifesto. Even before Everlane, Patagonia achieved success by building a brand that is transparent in every facet, from pricing to manufacturing and environmental impact.

3. Product Bundles

A screenshot of Cleancult's Complete home bundle from their eCommerce site. Spray bottles and paper containers of cleaning products like laundry soap and hand soap.

Many eCommerce stores run sales as a way to liquidate their inventory. But there is a better way to achieve this goal: by bundling products, rather than discounting them. Product bundles give customers the sense that they are getting a great value, without making a significant cut into your margins.

You can bundle related products, like candles bundled with candle holders or dog collars bundled with leashes. Or, you can bundle multiples of the same product like three candles for a slightly reduced price or two dog leashes for a few dollars off. Better yet, you can increase your audience by collaborating with another brand to sell a product bundle in both of your eCommerce stores.

The eco-friendly cleaning supply brand Cleancult maximizes their sales with the Complete Home Bundle, a starter set that includes all the supplies needed to clean a home. This bundle simplifies the buying process and makes it easier for customers to make the transition away from toxic cleaning products. Similarly, smoothie brand Realm offers a variety pack bundle that allows customers to try a variety of smoothie flavors all in one order. Even better yet, customers can sign up for a subscription bundle, which further streamlines the buying process and increases sales for the brand.

4. Free Trials or Money-Back Guarantees

If you are truly confident in the quality of your product, put your money where your mouth is by offering a free trial or money-back guarantee. This type of offer will boost customer confidence. Those who might have been on the fence about a purchase may be more willing to take the leap. Knowing they can test the waters without risk will give them the encouragement they need to give your product a try.

When you are selling a great product, most of those free trials will quickly turn into paid service, and very few customers will actually cash in on that money-back guarantee. It is a win-win for all.

Free trials and money-back guarantees can be found across all types of industries. While free trials are a natural fit for subscription brands like Hulu or Audible, other eCommerce brands can use the money-back guarantees or satisfaction guarantees to one-up their competitors. In fact, many companies have such an impressive guarantee, it has become part of their branding. For reference, check out REI, Costco, or Nordstrom.

5. Increase Product Value

Customers will be more likely to buy if they feel like they are getting a deal. So, how can they get a deal if you are not lowering the price of your product? One alternative is to increase the product’s value. 

You can boost product value by offering shipping, including a free gift, or adding another perk to the product like free customization. Alternatively, you can invest in product development and let customers know when you have made upgrades to the product. Because if customer’s know they’re getting a better product, they will be more eager to convert.

Companies like Zappos are the gold standard for increasing product value. Their customers could certainly buy the same product elsewhere, but they choose to shop from Zappos because of their free shipping policy, easy returns process and exemplary customer service.

6. Loyalty Programs

A screenshot of bareMinerals' Good Rewards Program. An illustration of an ocean with the words Good Rewards in a black circle.

Loyalty or reward programs are a great way to build relationships with customers and encourage them to come back for more. For example, you can offer a free gift once customers have made a certain number of purchases. You can als grant store cash or institute a referral program.

Brands like bareMinerals, Anthropologie, and IKEA have created successful loyalty/membership programs that increase customer retention. They send out birthday gifts, offer exclusive member-only sales, host free workshops and events and send thank you surprises.

While most customer loyalty programs offer discounts, they are far more personalized than a standard, site-wide sale, and personalization offers big ROI for retailers. According to a recent McKinsey study, personalization can reduce marketing and sales costs by 10-20 percent, increase customer loyalty and boost share-of-wallet with long-time customers.

Grow Your Business with Scalefast

eCommerce is growing more competitive every day, but brands can still grow their business without discounting their products. Scalefast offers all the tools eCommerce brands need to optimize user experience, increase conversion rates and grow a business. Learn how Scalefast can take your business to the next level by scheduling a demo today.

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