Offers, coupons, discounts and deals. There will come a time when most online merchants will be faced with the decision of whether to offer discounts, when to offer discounts and how much should the discounts be worth.
Offering discounts for your online store can be a powerful weapon in your conversion arsenal, however, used haphazardly, and you can do significant damage to your brand or worse, become unprofitable.
In this post, we'll review some of the pros and cons of offering deals for your online store, look at some of the most popular ways you can use discounts to drive conversions and, of course, how to most effectively use them.
Let’s dive in.
Note: For the purpose of this blog post and keeping things simple, we'll refer to coupons, discount and deals all as offers.
The Pros and Cons of Online Store Offers
Before we jump into some different ways you can effectively use offers to help increase customer loyalty and acquisition, let's first look at some of the pros and cons of utilizing offers for your online store:
- Easy and quick to implement.
- Easy to track.
- Increased customer acquisition.
- Increased conversions.
- Increased customer loyalty.
- Decreased margins and profitability.
- Possible brand damage.
- Decreased conversions outside of sale periods if you train visitors to wait for offers.
- Tendency to drive non-loyal (price driven) shoppers.
- Tendency to reduce average order size.
Who Are Offers Right For?
As mentioned previously, online store offers can be an effective tool for not only customer acquisition, but also for customer loyalty, however, it’s important to consider your overall brand strategy before you begin offering discounts.
If you want to position yourself as a higher end brand or if you have slimmer margins, you may want to consider sticking to customer loyalty type offers as oppose to weekly sales. On the other hand, if you have healthy margins deep discounting and daily/weekly sales might be better for hitting your goals.
Ultimately, you need to consider if offers and the type of offer is the right strategy for your brand. Regardless, building an online business will generally involve a lot of experimentation to understand what works best. The best approach is to choose a goal for every campaign and offer, start small and measure the results.
Types of Offers
There are several overall types of discounts and offers you have at your disposal. Let’s take a look at the most common:
- Percentage Based Discount - The most popular way to offer discounts is percentage based discounts. This can include small incentive percentages like 5% or 10% off, larger discount to really drive sales like 20% and 25% or large percentages like 50%+ to liquidate merchandise that isn’t moving or old.
- Dollar Value Discount - Offers that are based on a dollar value can be positioned as a credit. This makes people feel like they're wasting money if they don’t use it. In some studies, redemption of dollar based offers vs. percentage based offers can be as much as 175% greater.
- Free Shipping - Shipping costs are often cited as the number one reason for shopping cart abandonment. Offering free shipping is a great way to mitigate this and increase conversions. Often this is used in conjunction with a minimum order size to help increase the average order value.
- Free Gift - A free gift with a purchase can be a great way to provide additional value to customer. If used strategically, it can also be used to increase average order size and/or to get rid of product that isn’t moving.
When and How to Use Offers
There are a hundred and one ways you can use sales, offers, discount and deals to drive customer acquisition and conversions. Let’s take a look at some of the most popular ways below along with an example for each:
1. Weekly/Monthly Offers to Drive Sales and Meet Revenue Goals - These are traditional sales used to drive increased sales. Many times sales are used at the end of a month or quarter to increase revenues to meet projections and goals.
Example: Memebox does weekly sales as well as having monthly promo codes (bottom of email).
2. Prelaunch Offers - If you're still in the prelaunch stage of your business or maybe even launching a new product, you can use prelaunch offers to help drive traffic and peak interest.
Example: Harry’s, an online retailer of shaving goods used this approach with huge success. They offered free product in return for sharing their site prior to launch. Utilizing this tactic and type of offer Harry's was able to get 100,000 subscribers prior to even launching their online store.
3. Holiday/Season Offers - Black Friday, Christmas and New years are the big ones, but the whole year is sprinkled with holidays that you can use to stretch revenues with offers.
Example: Julep regularly makes use of not just holidays but seasons to promote offers to their visitors and past customers.
4. Abandon Cart Offers - With close to 70% of all people abandoning their carts, abandon cart email offers can be a powerful tactic to bring those people back. Shopify natively has abandon cart recovery functionality built in for those people on Professional or Unlimited plans. For everyone else, or if you want more customization and analytics, check out Klaviyo.
Example: Birchbox, a monthly subscription box service sends out abandon cart emails along with a 20% off discount 24 hours after cart abandonment to provide visitors with a reminder and incentive to come back and complete their subscription.
5. Email/Newsletter Subscription Offer - As you probably already know, building an email list is extremely important for online retailers. By providing an offer in exchange for visitors emails address, not only do you increase the chance of a conversion, but you also get their email, providing you with the opportunity to market new products and offers to them in the future.
Example: DODOcase, an online manufacturer of iPad cases offers 10% off your purchase for signing up to this newsletter. To implement your own popup email sign up with an offer, check out the Shopify App Pop-Up Window.
6. Offers for Liking, Following and Sharing On Social - One of the hardest parts of running a new online store is getting word out. Giving visitors and customers an incentive to share your store with their social circles can be an effective way to create some inexpensive word of mouth.
Example: Bombay Hair Extensions uses the Shopify App, Coupon Pop to offer visitors 5% off their purchase in exchange for visitors liking or sharing their online store.
7. Referral Offers - People are much more likely to purchase from you if referred by a friend or family member. Use this to your advantage and use offers to encourage referrals. You can choose to give a deal to the person referring, the person being referred or both.
Example: Again, DODOcase provides an incentive for all happy customers to share their purchase with their friends, as well as offering those people referred a discount on their first purchase.
8. First Time Shopper Offer - Providing a first timers offer could be just the nudge those first-time visitor needs to be converted to a paying customer.
Example: Clearly Contacts provides all new visitors with a 10% off discount and free shipping.
9. Volume/Cart Size Offer - An offer based on the total value of a shopping cart is an effective upselling tactic to encourage customers to spend more, increasing your average order size. A strategic way to incorporate this into your online store is to calculate your average order value for the previous few months and offer a discount or free shipping on all order 10-20% over your average order value.
Example: Popular online retailer Nasty Gal offers free shipping on all orders over $75.
10. Exclusive Social Offers - Exclusive offers on your social networks can be a great way to build a strong relationship with those that follow you as well as provide a reason for new people to follow and subscribe to your social channels, which will allow you to market to them in the future.
Example: Online beauty retailer, Sephora, will occasionally do social media network specific offers. In the example below they offered Facebook fans a free gift with any orders over $25.
11. Customer Loyalty Offers - Rewarding customer loyalty can help build an even stronger bond while also only providing discounts to customers that already spend money with your online store. It can be as simple as sending your best customers a personal email with a discount or credit, using an automated email marketing app like Klaviyo to send out email offers when someone makes a certain number of purchases from your store or implementing a customer loyalty program like LoyaltyLion.
12. Exit Intent Offer - Sometimes all it takes for to convert a visitor to a customer is a last second offer before they leave. An exit intent offer will popup just as your visitor is about to leave your site or close the tab, presenting them with a final offer to purchase.
13. Retargeting Offer - Retargeting offers are effective because they're only shown to people that have been on your site before so they already know who you are. The ads serve as a reminder to come back and the offer serves as a nudge to purchase. Check out AdRoll Retargeting to get started with retargeting offers.
Example: Again we have DODOcase as an example as they effectively use offers several times throughout the buying cycle to help convert visitors over to customers. In this case, DODOcase targets visitors to their site on Facebook and Google Adwords with retargeting ads that provide those previous visitors to their site with 20% off if they come back to purchase.
14. Influencer Offers (Bloggers, Celebrities etc.) - Partnering with influential people that have large audiences is a great way to increase exposure to your brand and by providing an exclusive offer to the influentials persons network, you’re more likely to convert their fans to your customers.
Example: Terrain partnered with popular bloggers for the launch of their new online store. To encourage people to click through from the blog post and increase conversions, Terrain provided bloggers with a unique offer code to share with their specific audience. This unique code also allowed Terrain to monitor and track redemption so they know which bloggers were most effective for future campaigns.
Offers and discounts aren't right for every online business, however, with a clear goal in mind, a firm understanding of the brand and some experimentation, you can most effectively utilize offers to meet your objectives, building customer loyalty and increasing revenues.
Tell us in the comments what offers has worked best for your online store and what you have found as the best channels to promote your offers.
About The Author
Richard Lazazzera is an ecommerce entrepreneur and Content Strategist at Shopify. Get more from Richard on Twitter.