How to Run Ecommerce Discounts Without Crushing Margins

Discounts can be a powerful tool for ecommerce brands, but without a well-defined strategy, they risk undermining your profitability and brand perception. When used effectively, discounts can clear inventory, attract new customers, and reward loyalty. However, frequent or poorly planned promotions can cause “discount fatigue,” reducing the perceived value of your products.

In this article, you’ll learn:

• Why Discounting Requires a Real Strategy
• How  Discounts Are Commonly Used
• Types of Discounts and How to Maximize Their Impact
• How to Balance Profit and Sales When Discounting
• Using Customer Segmentation with Discounting

Why Discounting Requires a Real Strategy

Nearly 88% of Americans rely on discount codes when shopping, and 64% hold off on purchases until a deal is available. This raises an important question: what truly makes a discount strategy effective?

When done right, strategically applied discounts can drive sales, encourage hesitant shoppers to complete their purchase, and attract new customers to explore your brand. 

Discounts have been shown to trigger the release of oxytocin, the “feel-good” hormone, which can boost customer satisfaction and reduce cart abandonment.

However, pricing psychology—the strategic art of setting prices—delves deeper than just highlighting the dollars saved. It’s about shaping perception, influencing decision-making, and creating a sense of value that aligns with the customer’s desires. A well-executed pricing strategy can subtly guide buyers to feel they’re making a smart, rewarding choice, turning a simple discount into a powerful conversion tool.

Here’s why a strategic approach matters:

1. Managing Inventory Effectively

Discounts are a vital tool for inventory management, helping ecommerce businesses tackle excess stock and prepare for new product launches. Here’s how they work and why they matter:

• Clear Out Slow-Moving Stock: Discounts help eliminate older or less popular items, freeing up space for fresh inventory. For example, a fashion retailer might run end-of-season sales to clear winter coats and make room for spring collections.
• Reduce Costs and Waste: Excess inventory ties up capital and increases storage costs. For perishable goods or trend-based items, discounts minimize waste and prevent obsolescence.
• Support New Product Launches: Electronics brands often discount older models to make room for newer ones, ensuring the latest products stay in the spotlight.
• Drive Urgency and Faster Purchases: Use messaging like “Limited Stock Left!” or “Final Clearance Sale” to create urgency and boost conversions. Highlight scarcity to motivate shoppers to act quickly.

2. Avoiding Discount Fatigue

Overusing discounts can backfire, causing customers to expect constant markdowns and delay purchases until a sale. This behavior erodes long-term revenue and devalues your brand.

To prevent discount fatigue:

• Time promotions strategically: Reserve discounts for key events like seasonal sales, product launches, or exclusives.
• Maintain full-price periods: This reinforces product value and positions your brand as premium.
• Vary discount strategies: Rotate between loyalty rewards, bundling deals, or other creative offers to keep promotions engaging and avoid repetitive sale cycles.

3. Maintaining Brand Value

Your pricing strategy plays a crucial role in shaping your brand’s identity. Overusing discounts can harm this perception, making your products seem less valuable or your brand appear desperate to sell.

To preserve brand integrity:

• Position discounts as exclusive: Use limited-time promotions or loyalty-based offers to make discounts feel like a special privilege, not a routine occurrence.
• Highlight product value: Pair discounts with messaging that emphasizes quality, craftsmanship, or sustainability to maintain a premium image.
• Strategic framing: Frame discounts as part of a meaningful event, such as a VIP appreciation gift or a seasonal celebration, reinforcing that the promotion is a bonus rather than a necessity.

How Discounts Are Commonly Used

Discounts are a versatile tool in ecommerce, but their effectiveness hinges on timing and purpose. Offering discounts strategically ensures you not only drive sales but also maintain profitability and customer loyalty. Let’s explore some key scenarios where discounts are commonly used and how they can be optimized for maximum impact.

1. Product Launches

Launching a new product presents a prime opportunity to use discounts strategically. Offering an introductory discount can:

• Build excitement: Attract both loyal customers and new shoppers eager to try something new.
• Overcome hesitation: Give hesitant buyers a reason to act immediately rather than waiting for reviews or future price drops.

For example, a tech brand introducing a new gadget could roll out a “Launch Week Special” with 20% off, supported by:

• Targeted email campaigns to loyal customers.
• SMS alerts to drive urgency.
• Social media ads that amplify visibility and buzz.

This approach not only accelerates early sales but also helps gather quick feedback to refine product positioning or features, ensuring a smoother post-launch phase.

2. Holiday Promotions

Holiday promotions are a cornerstone of ecommerce discount strategies, designed to capture the attention of shoppers actively searching for deals. These promotions often go beyond simple price cuts to include:

• Free shipping: A compelling incentive for online shoppers.
• BOGO deals: Encouraging bulk purchases for gifting.
• Tiered savings: Discounts that increase with the order value (e.g., 10% off $50, 20% off $100).

For instance, a fashion retailer might run a “12 Days of Deals” campaign in December, offering a unique discount each day to keep customers engaged and returning.

Merchant Example: Current, a brand known for its festive and budget-friendly products, leverages BOGO offers during the holiday season. Their dedicated Christmas BOGOs section includes items like tissue paper, ornaments, and gift wrap, making it easy for shoppers to stock up for holiday celebrations. This strategy not only caters to budget-conscious buyers but also boosts average order value by encouraging multi-item purchases.

3. Inventory Management

Discounts are invaluable for clearing out unsold or outdated inventory, especially for seasonal or trend-based products. Pairing markdowns with urgency-driven messaging can drive faster purchases. Here’s how:

• Seasonal Clearances: Run promotions like “End of Season Clearance” to sell holiday decor or seasonal items.
• Urgency Messaging: Use phrases such as “Final Sale” or “Limited Stock” to encourage quick decisions.
• Bundling Strategy: Pair slow-moving products with popular ones at a discounted rate to increase perceived value and clear stock efficiently.

4. Customer Rewards

Rewarding loyal customers with exclusive discounts builds stronger relationships and encourages repeat purchases. Loyalty rewards are typically delivered through:

• VIP programs: Offering perks like early access to sales or exclusive discounts.
• Email offers: Sending personalized promotions based on shopping behavior.
• Milestone incentives: Recognizing achievements like birthdays or spending thresholds.

Example: A beauty brand might offer a 15% discount during a customer’s birthday month or after they hit a specific spending milestone. This makes customers feel valued and increases the likelihood of repeat purchases.

5. Flash Sales and Special Events

Flash sales and special events are high-impact discount strategies that create urgency and excitement, driving immediate action. These promotions are short-term but can generate significant engagement and revenue.

• Flash Sales: A 24-hour sitewide sale offering 30% off can attract both new and returning customers, resulting in a quick revenue boost.
• Special Events: Store anniversaries, product launches, or exclusive collaborations are perfect occasions to offer discounts and thank customers for their loyalty.

Types of Discounts and How to Maximize Their Impact

1. Rewards (Loyalty Discounts)

What It Is:
Loyalty discounts reward repeat customers with special offers such as percentage discounts, exclusive early access, or points that can be redeemed for future purchases. These discounts are typically part of a structured loyalty program where shoppers earn rewards by meeting specific criteria like spending a certain amount or making frequent purchases.

Mirenesse, a beauty brand, excels at keeping its customers engaged with its premium rewards program. New subscribers are welcomed with $10 and 200 points upfront, creating instant value. Members earn two points for every $1 spent, providing ongoing incentives to shop regularly. For premium members, the program offers exclusive perks like free shipping, birthday bonuses, and access to limited products, further enhancing customer loyalty.

How to Maximize Impact:

• Personalize Rewards: Tailor offers based on customers’ past purchases or preferences to make them feel valued.
• Set Achievable Milestones: Ensure loyalty thresholds are attainable to encourage participation without discouraging shoppers.
• Promote Exclusivity: Use language like “VIP Access” or “Members Only” to make loyalty rewards feel special.
• Leverage Email and SMS: Keep loyal customers engaged with updates about new rewards or personalized offers.

2. Bundles

What It Is:
Bundling involves grouping multiple related products into a single package and selling them at a discounted price. This tactic encourages customers to spend more by showcasing the value of buying multiple items together, often at a lower cost than purchasing them individually. Bundles are especially effective for complementary products, such as a coffee maker with a set of mugs or skincare items designed to work together.

Corkcicle’s holiday bundles exemplify how themed packaging can enhance sales. Their curated options, like the “Minnie Mouse Bundle” or the “Garden Party Host Bundle,” cater to specific gifting occasions. Each bundle highlights significant savings (e.g., 25–29% off) while showcasing premium aesthetics.

How to Maximize Impact:

• Highlight Savings: Clearly show the total savings customers will get by purchasing the bundle compared to buying items individually. This taps into the shopper’s desire to get more value.
• Create Themed Bundles: Align product bundles with specific use cases, seasons, or events. For example, “Holiday Host Essentials” or “Weekend Getaway Kit” bundles can appeal to targeted needs.
• Upsell with Limited-Time Offers: Adding urgency by promoting bundles as limited-time deals can encourage immediate purchases.
• Leverage Shogun for Easy Setup: With tools like Shogun, you can easily create custom product pages that visually showcase bundles with clear pricing and benefits.

3. Promotional Discounts

What It Is:
Promotional discounts are short-term offers tied to specific events, seasons, or campaigns. These discounts can range from flat percentages off to free gifts with purchase, designed to drive immediate traffic and boost sales during targeted periods.

Caraway’s Black Friday campaign perfectly demonstrates how to combine tiered discounts with clear incentives. Their offer, “Up to 20% Off Sitewide,” encourages larger purchases with progressively higher savings. They even include an extra perk—a free gift for orders above $975—adding a layer of exclusivity and value.

How to Maximize Impact:

• Time It Strategically: Align promotional discounts with key events like Black Friday or product launches.
• Use Countdown Timers: Create urgency by showing how long the promotion will last.
• Pair with Email Campaigns: Drive awareness and participation by promoting the discount through newsletters or SMS.
• Track Performance: Use analytics to assess which promotions perform best and optimize future campaigns.

4. Subscription Discounts

What It Is:
Subscription discounts provide customers with incentives to subscribe for recurring purchases. Common discounts include a reduced first-month fee or percentage savings for subscribing instead of making one-time purchases.

Overtone, a hair care brand, uses subscription discounts to encourage repeat purchases of its coloring conditioners. Customers can “Subscribe and Save 10%,” locking in the price for life, receiving free shipping, and choosing their delivery frequency. This not only ensures convenience but also builds brand loyalty by offering tangible savings and flexibility.

How to Maximize Impact:

• Highlight Long-Term Savings: Show how subscribing saves more over time compared to individual purchases.
• Incentivize Sign-Ups: Offer a discount for the first purchase to encourage hesitant customers to try the subscription model.
• Use Free Trials: Allow customers to experience the value before committing to long-term subscriptions.
• Simplify the Process: Use Shogun’s user-friendly design features to create a seamless subscription experience on your storefront.

5. Flash Sales

What It Is:
Flash sales are short-term promotions designed to spark urgency and excitement among shoppers. These sales often feature steep price cuts for a short period, making them highly effective for clearing inventory or generating buzz. Bath & Body Works utlizes an email sequence to accompany their flash sales strategy.

How to Maximize Impact:

• Set Clear Time Limits: Use countdown timers to emphasize the urgency and drive quick decision-making.
• Leverage Social Proof: Highlight how many items are left in stock or how many others are viewing the product.
• Promote Aggressively: Announce flash sales across multiple channels like social media, email, and SMS.
• Optimize Checkout: Ensure a smooth checkout process to prevent cart abandonment during the sale.

How to Balance Profit and Sales When Discounting

Discounting can boost revenue, but it’s essential to protect your margins. Here’s how to strike a balance:

• Calculate Your Break-Even Point: Understand your production costs, overhead, and shipping to determine the lowest discount you can offer without losing money.
• Test Discount Levels: Run A/B tests to identify the sweet spot that maximizes sales while maintaining profitability. For instance, compare a 10% discount versus 15% to see which drives better results.
• Limit Discounts to Key Campaigns: Avoid constant discounts by reserving them for strategic moments, such as new launches or seasonal sales.
• Use Tiered Discounts: Encourage larger purchases by offering incremental savings (e.g., 10% off $50, 20% off $100).

Using Customer Segmentation with Discounting

Not every customer needs the same discount. Segmentation allows you to personalize offers for specific audiences, boosting relevance and conversions.

1. Segment by Behavior

• New Customers: Offer first-time purchase discounts to encourage conversions.
• Loyal Customers: Provide VIP discounts or early access to sales to reward loyalty.
• Cart Abandoners: Send targeted email offers to bring back shoppers who left items behind.

2. Leverage Email and SMS

• Use email campaigns to deliver personalized discounts, such as 10% off for new customers or a special anniversary discount for repeat buyers.
• SMS can provide instant updates on flash sales or exclusive offers.

3. Dynamic On-Page Offers with Shogun

• Use Shogun’s URL segmentation to create unique on-page experiences for visitors. For example, shoppers referred from a holiday email campaign could see a specific discount banner tailored to that promotion.

Designing Pages for Discounts Using Shogun

Shogun makes crafting effective discount pages simple and impactful. Here’s how to maximize its features:

• Leverage Pre-Designed Templates: Shogun’s templates allow you to quickly build discount pages with proven layouts. Choose ones that emphasize urgency and showcase key offers clearly.
• Highlight Key Messages: Use bold headlines like “Save 20% Today” at the top of the page and pair them with contrasting CTAs like “Shop Now.” Shogun’s drag-and-drop tools let you strategically place these elements for maximum visibility.
• Add Social Proof: Integrate reviews, testimonials, or user-generated content to boost trust. Shogun enables seamless embedding of these elements to reinforce credibility and drive conversions.
• Focus on Mobile Optimization: With Shogun’s responsive design features, ensure your discount pages load quickly and look great on all devices, especially mobile, where most purchases happen.
• Personalize the Experience: Use dynamic content or URL segmentation to customize discount pages based on user behavior or campaign sources. For example, personalize messages for email subscribers or loyalty program members to make the offer feel exclusive.