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Do Discounts Increase Sales? 5 Important Stats you Need to Know

5 minutes

Do discounts increase sales? Discounts are a go-to strategy for practically all retail businesses. Some companies use discounts as part of a permanent marketing strategy. For instance, they start with a manufacturer’s suggested retail price (MSRP) and then heavily discount it to the product’s actual retail price. In some instances, retailers offer additional discount codes, bulk discounts, or even buy one get one free (BOGO) promotions.

Indeed, discounts are commonplace in the online retail world. However, how well do they really work? Do discounts truly boost sales? In this article, we will explore the answer to this question by looking at five important stats that you need to know about discounts.

What are some different types of discounts?

There are various types of discounts and promotions you can offer in your store. Let’s take a closer look at some of the most popular options:

#1 Percentage off

This type of promotion assigns a certain percentage off a product. Typically, we see retailers offer 5%, 10%, 20%, and so forth. The actual percentage largely depends on the retailer’s margin. Generally speaking, retailers are willing to discount products close to or slightly below cost. Doing so ensures that retailers at least recoup their original expenses. However, there are instances where retailers may be willing to accept a loss to clear accumulated inventory.

Retailers may opt to offer a discount in money terms rather than percentages. Dollar discounts are useful when the discount doesn’t appear as attractive in percentage terms. For instance, is $25 discount off $1,000 equals to 2.5%. Thus, $25 off sounds more appealing than 2.5% off.

#2 Coupon codes

You may be asking yourself, “do coupons increase sales?” In short, they do. Coupon codes help entice customers, especially if they’re on the ropes about making a purchase. Often, a coupon can push customers over the edge. While they may have plenty of incentives to make a purchase, the coupon provides enough incentive to drive home the sale.

Coupon codes work because it makes customers feel special. It makes them feel like they’re getting an exclusive deal to which no one else is privy. As you can see, it’s a psychological effect, but a powerful one. Suppose you can harness your coupon code strategy effectively. In that case, you will find that getting the most out of your coupon codes leads to successful strategies.

#3 Bundle discounts

Bundle discounts are highly effective when done right. A bundle discount consists in offering customers a better deal when they buy more than a single item. For instance, customers can purchase item A for $5. They can get a better deal if they purchase two for $9 or three for $13. Bundle discounts work very well when you allow customers to customize their selections.

Bundles can become a great go-to option for fashion brands, food stores, or virtually any type of product. The secret is to find the right combination and price point that would make sense for the customer to spend more.

#4 BOGO

“Buy one, get one free” promotions aim to entice shoppers to pay for one product to get the other “free.” Some retailers add the free product’s cost into the original product in order to avoid losing on the free item. Some retailers are willing to give the free item for free but will attempt to recoup that cost elsewhere.

BOGO promotions can work very well when used strategically. For example, BOGO offers are great for introducing new brands or products. Since these products are relatively unknown, customers may be willing to give them a try given the great offer presented to them. Other variations of BOGO promotions include “Buy two, get three” or “four for the price of three,” and so on.

Another common promotion is “buy one, get 50% off the second.” These discounts entice customers to purchase one product at the regular price while discounting the second at a certain rate. Retailers make money on this promotion by averaging the sale price of both products.

Consider this example:

Product A retails for $10. The second item is 50% off. So, customers pay $5 for it. In total, customers pay $15 for both items. That sale price averages to $7.50 for each item. In this example, the retailer can profit based on a $7.50 sale price. They’ll make money as long as their costs are below $7.50.

#5 Bulk discounts

Bulk discounts work well with high-volume items. For instance, supermarkets offer bulk discounts when you buy a specific number of items. Bulk discounts work well because they compel customers to buy a larger amount of an item, increasing inventory turnover and generating more revenue.

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Do discounts increase sales?

So, we come back to the question, “do discounts increase sales?” To answer this question, we must consider five key figures.

1. Roughly 93% of consumers have reported using a coupon or discount code in the past year

This figure speaks for itself. According to data by Statista, over 90% of respondents surveyed indicated that they had used a coupon or discount code in the past year. This data clearly responds to “do coupons increase sales?”

How so?

The data shows that consumers use coupon codes. Consequently, you can be sure that a discount code will entice shoppers to purchase. All you have to do is use your strategy appropriately.

2. Bonus packs or bundles may increase sales by up to 73%

A study showed that sales could increase over 70% when retailers offer bonus packs or bundles. The psychology here is straightforward. Bonus packs or bundles work well because it gives consumers the perception that they’re getting additional value for the same price.

Please note that this strategy differs from a BOGO offer in the language you communicate. Instead of saying “buy one, get one free,” you’re communicating, “buy one and get this additional value.” You’re not telling customers they’re getting it free. You’re only communicating that they will receive an additional bonus in their purchase. Think of how cosmetic brands always throw in some sort of “bonus” item with every purchase.

3. The majority of consumers prefer to get money off instead of saving money

Most consumers feel they gain something when they see the wording “get money off” instead of “save money.” This Psychology Today article highlights this assumption.

How so?

The psyche processes these linguistic clues differently. For starters, “saving” money implies that consumers avoid losing something, in this case, money. Therefore, using this language in your promotions means that you are talking about avoiding a loss of money. Naturally, no one wants to lose money, right?

On the other hand, referring to discounts as “money off,” consumers feel they gain something from the promotion. In essence, they feel they gain value while spending less money.

You might be thinking, “isn’t it the same thing?” Yes, but the wording is different. By changing the language, you communicate a positive message instead of a negative one. Consumers feel that your brand provides them with additional value instead of avoiding a loss of money.

4. Consumers are four to five times more willing to purchase when offered free shipping

Free shipping? How is that a discount? Well, technically, offering free shipping is not a discount. However, it can be a discount if you frame it correctly. A Wall Street Journal piece highlighted this assumption by stating that consumers were four to five times more willing to complete a purchase when offered free shipping.

How does that make it a discount?

It’s all a question of psychology. Offering various alternatives, including paid expedited shipping, makes free shipping look like a great deal when you give customers shipping options. The trade-off is the time spent waiting for the package to arrive. Conversely, if customers want their item delivered immediately, they can pay for the extra shipping fee.

5. The data shows that most consumers associate discounts with poor performance

Research shows that most consumers feel that discounted products are poor performers. Hence, brands and shops discount items they can’t sell. Is this argument meant to discourage you from using discounts?

Hardly!

This point intends to highlight the need for a strategic approach to discounts. In short, you must avoid overdoing discounts. Best-selling items should not be discounted, especially if customers pay full price for them. Instead, use the following strategies to discount items you want to ensure customers see your discount deals appropriately:

Seasonal discounts. Associating discounts with specific seasons helps consumers positively associate seasons with discounts. After all, doesn’t it make sense to discount swimsuits during the summer? Consumers are much likelier to take advantage of sales when they are most likely to use the products they purchase.

Product bundles. Bundles are discounts that don’t appear as discounts. Bundles play on the psychological principle of obtaining something rather than avoiding losing it. Therefore, bundles work best to entice shoppers to jump on a deal. However, there is a small catch. The original product ought to be full price. In doing so, it appears that the original product delivers the value consumers expect.

Discounts for bulk purchases. Rewarding your customers for buying in bulk is a smart way to discount your products. Just make sure that you don’t over-discount, and take into account the potentially higher costs of shipping a larger order.

How can you use PickyStory discounts to increase your sales?

With PickyStory’s product bundles and deals, you have the option of adding discounts to any or all of your deals. Discount options are flexible and include:

Percentage-based discounts (i.e. 20% off when you purchase three)
Fixed-amount discounts (i.e. $20 off)
Target price discounts (i.e. 3 for $50)
Tiered discounts based on product quantity (i.e. buy 2, save $10, buy 3, save $20)

You can also set up storewide coupon codes in PickyStory. These can be stacked with deal-specific discounts, making your customers eligible for both a deal discount and a storewide discount in the same order.

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So, do discounts increase sales?

Using an effective discount strategy can help your business make the most of its unique value proposition. Based on the stats provided above, discounts do increase sales for a large number of brands.

As long as you are not over-discounting your products and carefully monitoring your sales data, you can likely see great results from offering specific discounts and promotions across your store.

PickyStory makes it easy to offer both product-specific and storewide discounts, and offers flexible pricing rules that allow you to create highly specific sales experiences. Start using PickyStory to offer discounted product bundles and deals.

If you’re looking for more e-commerce tips and recommendations, check out the PickyStory blog.

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Do Discounts Increase Sales? 5 Important Stats you Need to Know

What are some different types of discounts?

#1 Percentage off

#2 Coupon codes

#3 Bundle discounts

#4 BOGO

#5 Bulk discounts

Grow your sales with high-performing deals.

Do discounts increase sales?

1. Roughly 93% of consumers have reported using a coupon or discount code in the past year

2. Bonus packs or bundles may increase sales by up to 73%

3. The majority of consumers prefer to get money off instead of saving money

4. Consumers are four to five times more willing to purchase when offered free shipping

5. The data shows that most consumers associate discounts with poor performance

How can you use PickyStory discounts to increase your sales?

So, do discounts increase sales?

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