How to Drive E-commerce Sales Without Discounting

Consumers love a good deal, and few things get the heart pumping like seeing that the flat screen television you’ve been eyeing is 30% off or that a pricey shirt you love is on clearance. In fact, 126.9 million U.S. adults are projected to redeem online coupons in 2016, compared to 92.3 million in 2012. And last Thanksgiving (the official kick-off of holiday shopping season), nearly 2/3 of the top 1,000 e-retailers offered discounts.

So for retailers, offering discounts and huge sales seems like a no-brainer. Your customers are happy, your sales go up- it’s a win-win situation. Or is it?

As it turns out, discounting your e-commerce products can actually harm your business in the long term. Here’s why- and here’s what you can do to get customers to buy your products without offering a heavy discount.

How to Drive Discount Sales Without Discounting Infographic

The Dangers of Discounting

Ever heard the saying “You get what you pay for”? Well, when customers see that they have to pay much less for an item, they believe that it’s worth much less. Studies have shown a direct relationship between price, discounting, and how much a consumer believes the item to be valued. The more the item is discounted, the lower the perceived value. For example, according to Price Intelligently, customers receiving a discount on their initial purchase on an item or first month of a subscription will value the product at least 12% lower than its list price.

Retailers are also tempted to discount products by the lure of a sales spike combined with the tempting idea of beating their competitors’ sales numbers. However, one study found that while supermarket sales of Cornflakes increased by 500% during a day of discounting, they fell back to normal levels as soon as the promotion was over, showing the extremely short duration that customers are interested in the product on sale.

Interestingly, that same study found that when one brand discounted their laundry detergent, sales increased by 450%. Sounds great- but in fact, their competitors’ sales didn’t fall during that same period, and in fact, one competitor saw sales increase by 200%.

Finally, the long-term costs of a flash sale might be more detrimental than brands may originally think. The overuse of discounts has been shown to impact price sensitivity, meaning that once a product returns to its normal price, customers may have a more negative perception of the item- leading retailers to discount the product more and more in order to stay in their customers’ good favor.

One example? The hotel industry. Recent studies have found that 81% of hoteliers are discounting more now than they were five years ago, with 75% saying these discounting “strategies” had a negative impact on their brand.

Instead of viewing discounting as a silver bullet that will incentivize your customers to purchase from you in large quantities, it’s time to address the underlying issues stopping you from reaching your sales potential.

Why Don’t People Buy Your Stuff?

Don’t take it personally: only 2% of shoppers convert on their first visit to an online store. And that’s part of the reason discounts are so appealing to retailers – because they make it appealing for customers to buy now. However, you can grow your sales by understanding what stops shoppers from buying without ever having to rely on discounts.

Generally, customers stop short of making a purchase for a few potential reasons, the biggest of which is shipping. 61% of shoppers say they would abandon an order if free shipping wasn’t offered, and 69% of shoppers believe they would be more likely to support a retailers who offers free shipping.

It’s true that offering free shipping may be costly; however, doing so might end up increasing order values. Case in point: Dan Ariely, a behavioral economics professor at Duke University, found that people are between four and five times more likely to spend $5 on an item if either the shipping or the item is free as they are to pay $2.50 for the same product plus $2.50 for shipping. Ultimately, providing free shipping provides a high perceived value without discounting the actual product.

Another simple reason online shoppers abandon their carts? They’re just not ready to buy yet. Retailers can combat this by sending abandoned cart emails within three hours (which has been shown to reduce abandonment by up to 40%). E-retailers can also use retargeting to bring shoppers back when they’re ready; visitors who are retargeted with display ads are 70% more likely to convert.

Other potential reasons people don’t buy from your e-commerce site are due to a slow payment process and concerns about payment security. Therefore, it’s in your best interests to keep your site speed as fast as possible. You can also add security logos to your checkout page; these trust symbols have been shown to increase sales by 4-6%.

How Can You Get People to Keep Buying Your Stuff?

Now that you know to avoid discounts and how to address the real problems plaguing your e-commerce sales, it’s time to discuss the strategies that will keep your customers purchasing from your site.

You may be able to write a bang-up product description, but consumer reviews are trusted nearly 12 times more than product descriptions from manufacturers, and 61% of customers read reviews before purchasing. Reviews also produce an average sales uplift of 18%, meaning that a simple email to a customer asking them to review a product they purchased could go a long way.

Social media platforms are also making it increasingly easy for e-commerce businesses to encourage low-friction transactions. Pinterest and Instagram recently joined Facebook and Twitter by adding ‘shop now’ buttons to enable fans to more easily purchase directly via social media.

If your business sells products that customers need to buy regularly or if you have similar offerings to your competitors, a loyalty program may be a smart strategy for you. Loyalty programs are incredibly effective at increasing how much your customers spend on your e-commerce site; in fact, loyalty program customers spend 13% more than average customers.

For a strong customer loyalty program, start by deciding your primary focus. Do you want to acquire new customers? Improve customer retention? Increase customer spending? Whatever your goal is, keep that at the forefront of your loyalty program initiatives.

Next, use market research to identify the customer segment best suited to a loyalty program, then tailor your program to their wants and needs. There are several different types of loyalty programs you can model yours after: you can offer flat discounts, tiered rewards, or personalized offers, each of which will appeal to a different segment of your customer base.

On the surface, offering flash sales and discounts seems like a promising e-commerce strategy. Unfortunately, surface-level benefits are all you’ll get. Instead, focus on discovering the obstacles preventing your customers from making purchases, and then address those individually, using loyalty programs to help supplement your sales.