If you discount your products, does it hurt your brand?
Some people say yes, some no.
It’s no secret that discounts and promotions bring in more sales, but is it a good long term strategy or a cheap trick?
Some people think offering discounts de-values their product, they don’t want to cheapen their brand.
Tip: Check out the comments for some great insight from other business owners.
I hear you.
I used to feel the same way.
In fact, very successful business owners like Tony Perez feel the same way:
I actually personally hate promotions. I don’t dismiss their value, but we were always a bit snobby with our value.
I don’t base it on data, but rather personal preference and stubbornness. I have always felt that if you’re willing to consistently discount the product, and that’s the only way you’re selling, then that’s probably a strong indicator that your pricing is too high.
I actually personally hate promotions. I don’t dismiss their value, but we were always a bit snobby with our value.I think this has a lot of merit, maybe discounts aren’t right for your brand, or your pricing is too high.
Matt Cromwell from GiveWP has a similar opinion:
Overall, we find promos and coupons generally devalue our products in a way that we’re not comfortable with. Across the board, WordPress products are VERY affordable and we don’t feel like we should be part of the race to the bottom.
Overall, we find promos and coupons generally devalue our products in a way that we’re not comfortable with. Across the board, WordPress products are VERY affordable and we don’t feel like we should be part of the race to the bottom.Tony and Matt are not alone, I’ve heard similar opinions from others.
These are valid points, and I don’t think discounts are right for every company, but…
I think it’s possible to run discounts (and other promotions) without hurting your brand.
I’m not the only one.
Vova Feldman from Freemius says:
I’m PRO periodic/seasonal discounts. If done properly they can help your business, it’s a matter of psychology. A great example of an aggressive discount strategy is Banana Republic, they always have at least 30% discount.
I’m PRO periodic/seasonal discounts. If done properly they can help your business, it’s a matter of psychology. A great example of an aggressive discount strategy is Banana Republic, they always have at least 30% discount.He’s right about Banana Republic, and their brand seems to be doing ok.
Other companies that I’ve seen offer discounts recently include iThemes, WooCommerce, Amazon, WP Rocket, Easy Digital Downloads, WP Engine, and lots more.
These are all respectable brands with sustainable revenue, and they don’t seem to be hurt by these discounts.
Some people have a negative view of promotions because they are overused. Discounts are a tool that can be beneficial to your company if used correctly.
Also keep in mind promotions don’t always have to be discounts.
There are lots of clever ways to get people to buy without directly discounting, which we’ll talk about in this article.
Many successful companies use discounts and promotions to increase their revenue, they just do it strategically. Without discounts, these customers may have never purchased, so it does increase profitability.
If you run your promotions correctly, they will increase long-term profitability without hurting your brand.
After running promotions for years in my own business, here are 7 things I’ve learned that can help you maximize revenue and avoid hurting your brand when doing a promotion.
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1. Don’t use discounts out of laziness
There are right and wrong ways to do promotions. The wrong way is to offer a discount because you are desperate or lazy.
Offering a discount to sign up for your email list is lazy.
Sorry.
I know that’s gonna offend some people, but it’s true.
When I see that, I know instantly that this will not be a valuable list to be a part of, they just want to send me emails to buy their product.
Why is this a bad tactic?
- This tells me nothing about what emails I will receive, or why I should care. There is no value beyond the coupon.
- Offering a discount will get signups, but it won’t keep people on your list. They will be much more likely to unsubscribe.
- I barely got to your site and you’re already giving away discounts, it comes off as desperate.
Is this to say it won’t work? Certainly not.
You will probably get a lot of signups, but we are talking about how to keep our brand name intact and create long-term value.
This offer makes it clear to me they aren’t creating any good content, that’s why they have to bribe people to sign up with a discount. This is not a good way to start a relationship with a customer.
Instead you should be showing your potential customer that they will receive tons of value by being on your list. Fabfitfun offers tremendous value, and makes it enticing for their target customer to hand over their email:
Offering valuable content that is related to your product will get you more targeted subscribers that are interested in your subject matter. If you want to build your brand, provide great content that shows the value of your product.
For example, Neil Patel makes a very enticing offer on his website:
His offer gets targeted leads that are much more likely to stay in his list and open his emails than if he offered a coupon for his latest product.
Using discounts because you haven’t put any time into marketing strategy is bad for your branding. If you use them too often, they will become less effective, and potential customers will wait to purchase until they have a coupon.
Discounts are a small part of a larger strategy to acquire customers, it can’t be your whole strategy.
2. Plan Ahead
Planning ahead makes sure you don’t do too many discounts, which can train your customers to expect them.
If you’ve been selling products for a while, you know that there are certain times of the year that are slow. These are the times when you need to boost your sales, so plan for this ahead of time.
Know your slow times of year.
Slow times will differ based on your industry, but for me it is generally around the holidays, and the summer. Sales ramp up from January to May, then are really slow from June to August, then ramp up again from September to December. There is a bit of a lull over the holidays, then you start over again in January. I’ve talked to many digital product business owners, and they have confirmed the same.
Things are usually slow when people are not in front of their computers. There’s a reason you see a lot of holiday sales, it’s because advertisers are trying to give people a reason to get to their computer and buy.
Amazon is trying to make Prime Day bigger than Black Friday, and they purposely made it in the middle of July. I wonder why?
Your industry may have different slow times, ask around and figure out the best time to run your discounts.
3. Do 4 major promos per year
Cory Miller of iThemes once told me to run a major promotion about 4 times per year.
I like this strategy because running a promotion every 3 months or so gives you time to build up a back-log of people who are still deciding if they want to purchase or not. A discount gives them a reason to purchase now, instead of waiting, and maybe never purchasing at all.
Instead of spacing them out exactly every 3 months, try to hit the slow times. I know I am going to be slow during the summer, so I plan a sale at the beginning and end to help keep profits steady. I run a sale during Black Friday/Cyber Monday, and we usually get double our normal sales. Christmas/New Year’s is a good time for a holiday sale, and there you have 4 major promotions.
Side note about percentage discounts: I’ve found that 20% or more works best. The higher the discount, the more sales you will get. 10% discounts won’t get you much excitement, but 40-50% will be a flood of sales.
4. Promote Your Promotion
This one is more about maximizing revenue than maintaining brand identity, but if you’re gonna do a promo, you should make it a good one.
Your promotion isn’t going to work if no one knows about it, so work on strategically promoting it.
Email your list at least twice for a major promo, or even 3-4 times if you think your audience won’t be too annoyed. Send one email to announce the sale, then at least one more when the sale is about to end. You will get most of your sales towards the end, so make sure you send a “last chance” email.
You should also advertise the sale on your site, you could write a blog post or add it to your pricing page.
I don’t like to write blog posts about sales, because your customers will come along months later and see that post, and ask you to extend the discount.
An easy alternative is to use a header banner or popup:
You can use a plugin like Holler Box Pro or Hello Bar to display this banner and track conversions. Holler Box even lets you deactivate the banner automatically when the sale ends.
You’ll also want to schedule social media posts to announce the promotion, send out several posts over the course of the sale, but try not to get too spammy. Create a nice graphic like the one below from Pinterest that you can use when sharing to attract even more attention.
5. Don’t Show the Same Thing to Everyone
Personalizing your promotion is a great way to run a promo without over-exposing it.
Someone who already bought your product doesn’t need to be notified you are running a discount. You also might want to send different promotions to different people. For example, if a customer has been on your email list for a year and never purchased anything, you might want to send them a really juicy offer to get them to buy. Someone who just signed up for your list doesn’t need the same type of offer.
You can do this a couple of ways:
1. Use a plugin or custom code to hide promotions from current customers.
If your customers purchased using Easy Digital Downloads or WooCommerce, they should be logged in to access their account. When putting a promotional banner or popup on your site, only show it to non logged in users.
You can do this using the is_user_logged_in() function, or using a setting in a plugin like Holler Box:
You could also set a cookie when someone purchases, but cookies can be cleared so they are not very reliable.
2. Segment your email list
You can segment your email list so that you know who has already purchased.
There are lots of ways to do this, in Convertkit I can add a tag when someone purchases using the EDD Convertkit add-on or the WooCommerce Converkit plugin. Segmenting like this is possible with many email providers, and it’s incredibly important.
I segment my list using tags like: Purchased, Purchased X product, Pre-sales Inquiry, Registered for Webinar, Interest List, etc. Basically I want to know what action they took so I can send them appropriate content.
Then when I announce a promotion, I send it to everyone except those who already purchased.
6. Do Smaller Targeted Promotions
You only want to do big public promotions a few times per year, or else you train your customers to wait for a discount to purchase. However, you can still run smaller, targeted promotions in between the larger ones.
If you have segmented your email list, you have customers in different phases of the buying cycle. You can do a promotion only for a certain segment, and send it to only them. Here are a few examples:
- Run a webinar and then send a discount only to webinar attendees.
- Email cold subscribers, or people who have cancelled with a really juicy offer to win them back.
- Do a promotion with a partner, offer a discount only to their audience.
Another idea is to discount a complementary product or service to go along with your main offering. If you normally charge $99 for a setup, give it away free or heavily discounted with a purchase for a limited time.
These smaller promotions are a great time to try something more creative than a straight discount. Offer 2 months free, we pay the tax, or free setup for a limited time. You can also include bonus items such as a complementary product, ebook, or unlocking an extra product feature.
Digital marketers use bonuses all the time when launching a product:
Here’s an example of a free gift bonus from Clinique:
There’s no end to the amount of creative promotions you can do, and if done right you don’t need to worry about hurting your brand. The key is to offer incentives without de-valuing your core product.
7. Use Discounts as a Gateway to Other Products
Some people see a discount and think it devalues their core product.
Smart business owners know that even if they lose money on the initial purchase, they will make profit with the next purchase.
Your customers have an LTV, or lifetime value. If you know how to calculate LTV, you can determine how much you can afford to lose on the first purchase and still profit in the long run.
Have you heard of a loss leader? It’s a product sold at a loss to attract customers into a store.
For example, supermarkets will sell items such as milk and eggs at less than they purchased them for to attract customers to their store. Even though they lose money on those items, they bank on customers purchasing other items such as potato chips and beer which more than make up for the loss.
If you sell multiple products, you can use a discounted item as a loss leader to get customers to buy other things from your store. Some companies do this to introduce customers to their brand, and they bank on keeping them around long enough to make a profit.
For example, some companies sell a piece of software at a break-even price, then give the customer great service. A few months later, they introduce the customer to other products they sell, and make profit from those.
In this way the discount is seen as the cost of customer acquisition, not an actual loss of profit.
Conclusion
If you hate discounting because you think it’s cheapening your brand, I hear you. I used to feel that way too.
People like to use Apple as an example. They say:
“Apple doesn’t do discounts, and I want to build a brand like Apple.”
We all love and admire Apple, and we all love our brands. The thing is, Apple is the most profitable company in the world, they don’t need to do discounts.
I think most people who are against discounts are afraid of devaluing their brand, but I have not seen any data to support that.
It’s not the discount itself that cheapens your brand, it’s the way you use the discount. When used the right way, discounts can add to your bottom line in a sustainable way, without devaluing your core products.
What is your opinion on discounts? Let me know in the comments.
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I think there’s nothing wrong with using discounts to incentivize sales and create FOMO. But I think it should be relatively rare. Use them to get customers to take an action you want them to take that they would not ordinarily take, not to juice your sales cycle.
Banana Republic and J.Crew are examples of why you should NOT run frequent promotions, imho. Anyone buying their clothing at less than a 30% discount is a sucker because in 30 days, they’ll run the same promo again. It trains customers to only buy during promotions.
Not only does this potentially train customers to only buy during sales (which is killing J.Crew), but it can also cheapen the brand by erasing the perceived value.
That being said, I like your ideas of segmenting and only promoting sales to people who haven’t purchased. I think discounts are a great way to move the needle on first time purchases. And honestly a small discount is probably good enough — I love how AffiliateWP does exit intent detection to give you an immediate 10% off. That’s a smart way to use discounts…use it in a moment where you are about to lose a sale or to push someone from uncertainty to certainty.
It all depends on how you want people to perceive your brand. If you are Sucuri, I get why they don’t do discounts. Their product is the best value already and they should not compromise on price. But, there are many businesses that can benefit from them.
Our product business is small, and we haven’t done a ton of promotions so I don’t think I can really give much more feedback than that.
P.S. I love iThemes, but I can tell you that their aggressive marketing and discount sales cycle harmed my impression of their brand while I was a subscriber a few years ago. The frequency eliminated any FOMO and replaced it with apathy. By contrast, when I get a promo from EDD, I’m more likely to ask myself “Should I be jumping in on this?” Because they have not trained me that there’s always going to be another sale around the corner. (And their stuff rocks)
Great points Clifton, you can definitely train your customers to wait for discounts if you do them too often. Retail is certainly a different game than WordPress plugins, so maybe not the best comparison.
I’ve run a lot of promos, and I find that a 10% discount isn’t enough motivation to change someone’s mind. 15-20% is better.
iThemes agressively discounts, but they have a certain type of customer and a different sales funnel than most of us. They are doing extremely well, so they are definitely using discounts as part of a larger strategy that is working.
Cheers!
Thanks so much fort his article, Scott! As someone who is just getting into the products arena, discounts are something I have had on the back of my mind for a little while new. I appreciate your well thought out approach here.
Question… what are your thoughts regarding opt-in popups?
I think popups are just a tool, and they can be useful when used correctly. If you overuse them, they will hurt you overall.
Most popup tools have lots of fine-tuned targeting you can use to make sure you aren’t blasting your visitors in the face all the time. I wrote a post on how I use Holler Box for popups and such https://hollerwp.com/use-holler-box/
Awesome! I’ll check it out!
Running discount when a new product is launched is ok. But don’t do it too often so you don’t train your customers to put off purchase until you run a discount again.
I agree with the sentiment that discounting your product in some cases makes users or interested people to perceive it as low quality.
If your product is great and offers features you think/know buyers will find very useful, initally you might be criticize for being too expensive but from my experience with ProfilePress, they eventually come back after trying other (low quality) alternatives and I hear comments such as “We’ve tried others but yours is way better”
Thanks Collins. Do you run promotions at all now for ProfilePress?
Yes I do. First is for those upgrade from the Lite to PRO. I have a discount displayed on the settings page of the lite version in the repo. And on black Friday / cyber Monday.
DIscounts are tricky. There are tens of thousands of businesses that run exclusively thanks to discounts and that’s what their entire revenue model revolves around.
Examples being Groupon or Mighty Deals.
Best case scenario, I would agree with the Apple concept. Building a business that doesn’t introduce discounts showcases trust and conveys value. I read it as: “This is how much our product costs and we have spent years on finding the best price point. Take it or leave it.”
That’s not always feasible and not as applicable for many small brands. As Matt mentioned in the original post above, WordPress products are indeed quite cheap overall and we’ve seen far too many shops racing to the bottom. That doesn’t help building a sustainable business. Thin margins lead to trimming costs for R&D, security, performance enhancements, market research, building an extensive set of add-ons or introducing improvements as a whole.
It doesn’t help growing the customer base, either. As a consumer, I prefer working with large vendors as the risk of closing shop is lower and the odds for introducing valuable updates are higher.
International holidays or events such as “Black Friday” or “Cyber Monday” put a pressure on businesses eager to join blogs featuring top offers. They may generate some solid sales as well. But consumers who are not in a hurry often postpone purchases and wait for one of those strategic days when vendors come up with some solid discounts.
Also, discounts for lifetime licenses (or paying several years upfront) are understandable.
Otherwise, a shop known for *not* offering discounts has a lesser chance of customers waiting for a possible “surprise”. Sales are somewhat steady and move in a predictable manner.
I realize the brand exposure opportunities when using discounts but I’m generally not in favor of using them often. Issuing coupon codes for major brand-related events (anniversary) is cool. Upselling products (selling a bundle) instead of discounting is great. But building a reputation around “the next promotion is coming soon” can reduce the revenue on an annual basis.
Some discount strategies are also problematic in terms of perception. Most hosting vendors keep a 24/7/365 deal of “70% off” or so for their plans. If renewals aren’t explained properly, customers often tend to complain about the 3x cost they have to pay for year 2 and onward. Non-tech business owners sense a vendor lock-in whenever they’re afraid of migrations, losing their emails, data, causing downtime during DNS switch or paying a lot of money to freelancers in order to make the switch.
Great points Mario.
I agree that building a brand who isn’t known for discounts can be a positive thing, but…I don’t think using strategic discounts hurts brand perception. It’s all in the way you use them.
I think many people buying WordPress plugins are doing so for a client project or a new site, and they don’t have time to wait for the next big sale. However, if you do a promotion, they might buy in anticipation of a future need. If you don’t do promotions, you miss this opportunity.
As long as these promotions are spaced out enough I don’t think anyone will look at your brand as a “discount” brand.
Great lot of comments here!
I’m adding here at an interesting point in my business. We just stopped offering free trials for monthly plans and now offer 50% off the first month of service instead.
I think most people are swayed by seeing some sort of discount and almost everybody would rather pay less than more for any given product or service. That being said, you can’t discount too much or often or, like Tony said above, your pricing is probably just too high to begin with.
But I think offering a discount for a certain period of time or to give a product or service a try is smart. It lowers the barrier for entry and lets people feel like they’re getting involved for less risk. As far as customer lifetime value goes, offering a discount for a small period of time (for people offering subscription pricing) doesn’t affect your bottom line much but gets more people in the door, so it’s a net positive.
We also offer a 25% discount pretty heavily to all our customers. But to activate that discount, new customers have to opt into an annual plan instead of a monthly plan. For our mid-tier plan, that means you can pay $80 / month ($960 / year) or get 25% off and pay $720 after a quick 7-day free trial. This set up means both the customer wins (they save $240) and we win because we influx the business with more cash today. To me, that’s a nice tradeoff for offering discounted pricing and creates a mutually-beneficial tradeoff.
In general, I’m against giving a blanket discount just to sell customers, especially when you’re just starting out. Big companies can offer discounts and still hit their bottom lines because they’ve already proved their concept and are using discounts as a tool (part of their larger sales strategy). But it’s much more important for smaller businesses to learn how to sell at a higher price and create value, not offer something less value for less cost. That’s how you get stuck trying to grow and scale.
Just my two cents!
Great insight Joe, thanks for sharing!
Scott, lots of great advice in this article.
I could find myself in the first point, but I’m working hard every day so we’re moving away from it doing discounts out of laziness. My excuse was it’s the easiest one to implement and it worked quite well for us so far. But I can also confirm the downsides: people we’ve signed up to our newsletter list via discount incentive aren’t opening emails.
You’ve written this article around the discounts, but many good points made here are more general and go wider than discounts – like segmenting the users and personalizing your offer and messaging.
Thanks again and good luck!
Thanks for sharing Primoz, I’m guilty out of discounting because of fear or laziness as well. Changing my thinking from short term to longer term helps, but it’s not always easy.
Awesome post, Scott! Thanks a lot for writing this. A lot of useful advices!
Running discounts they need to have a reason and strongly associated with your brand strategy!
When I google discounts without hurting your brand. I thought this article was going to be helpful. However, It is the worst examples I have seen in business. Banana Republic is going out of business…even in 2017 when this article was written. #theyarenotdoingokay
As many stated…it cheapens your brand. If a business think they can sustain free shipping and discounts. Check out their numbers in year after year, they have no growth. Companies and should look for better pricing strategies. If you can sell a $100 product for $70 then price it at $70, customer price shop anyway.
However, if your company can survive 30% or even 15% off every transaction then your business will not be around for long. The average profit margin for companies is around 8%.
When business take a stand and believe in their businesses to let customers know you do provide a quality products and we determined what these products should cost. Our company only discounts items that are end of life from the Mfg. If it is a new product or a product that has been in the market for a while, we are not going to discount it.
People and customers who want discounts will not appreciate the service and quality of products that you offer.
Thank you for writing this post Scott. Do you think those 4 discounts would be at the end of seasons?
Amazing article Scott. Thank you for sharing these helpful insights. They are really helpful for small as well as large businesses. I totally agree on the point “Don’t use discounts out of laziness”, many businesses fail due to this tactic. Again many thanks. 🙂
Flabbergasting ways to give a discount without hurting a brand. Thank you so much.
I’m 100% agree, half of the people ignore the signup discount, but I personally think it takes to much time and sometimes you didn’t receive the code immediately.
The store should add current active codes in the cart automatically like, Ali Baba, Shein, and some other stores do.
BTW love your post, Keep up the good work : )
Instead of these what will be your next plans for discount? It’s also good and beneficial. Thanks for sharing.