The Psychology Of Discounts: How To Enhance Your Sales Potential

When customers are shopping, whether it’s for something that they need or a fun treat to brighten their day, they are going to make sure that they are getting a good deal. While it is important to make sure that your every day pricing reflects the value of your products or services and the budget of your audience, running occasional sales can help you boost your revenue and bring in new customers.

How Discounts Affect Customer Behavior:

Getting a discount on a product customers need or want is a fun surprise for them, and might even encourage them to make a purchase they weren’t previously planning on making. A study done by coupons.com and Claremont Graduate University found that saving money through discounts makes people happier and more relaxed. If a customer makes a discounted purchase from you, they will get a boost in oxytocin levels, which helps lead to a positive association with your brand.

Offering discounts helps create a sense of urgency, and encourages your audience to make a purchase with you quickly rather than to continue shopping around or buying from one of your competitors. By not making a purchase, they risk regretting missing out on a deal, which is a driving factor in their urgency. Using phrases like “limited time offer”, “while supplies last”, or “today only” encourages shoppers to take advantage of the deal you are offering. Be careful with how limited you make the deal- if you run a flash sale that only runs an hour or two you risk missing out on a lot of customers who might not see the deal in time. Giving them a heads up that you are running a promotion or teasing them with a “special offer” in the week leading up to your sale creates excitement and allows your audience to prepare.

How To Present Discounts:

How you phrase the discount you are offering can make a huge difference. It sounds silly, but customers do not like to do math, they just want to know how good of a deal they are getting. For example, say you were selling a product that runs $50 full price, and you want to offer a discount of 25% off. You could present this several ways- 1) 25% off of $50 or 2) $12.50 off of $50, or 3) Buy one, get one 50% off (if the 25% still applied to a single item). These are all the same deal, but the 50% off sounds like the best deal. Rephrase you deals several ways to see which one sounds the most appealing, and think of what you would be most drawn in by.

Depending on your goals and your audience, there are different types of discounts you can offer. A certain percentage off is a popular and effective method that many people choose to use.

If you want to try something different, you can run a BOGO (buy one get discount). This can be BOGO free, or BOGO with a discount on the second item (when the discount does not apply to a single item). If you have a lot of products that customers could purchase at one time (clothing, beauty, décor) tiered discounts are incentive for customers to make bigger purchases. Tiered discounts work by raising the discount by how much money the customer is spending- 10% off of $50, 20% off of $60, etc. You will need to cap the discounts at some point (40% off purchases over $150) and do the math to make sure that you are still making a profit while offering a good deal.

Free shipping over a certain amount is also a great discount to offer, and one that you could offer continuously, rather than just as a special. Even if a customer ends up spending more on extra products than they would have on shipping costs, it is an incentive that has a high success rate.

If you decide to run a special, make sure that you have goals in mind before getting started. Are you trying to boost a new product? Clear out old inventory? Draw in new customers? Increase revenue? Encourage previous customers to shop with you again? Use this to determine who you want to target, and what kind of discount you want to offer.

Running sales can (and should) benefit both you and your customers. Make sure that you have a plan and present your deal in a way that your audience will love!