No two ways about it: discounting negatively affects buyer psychology.
I’m not a fan of discounting for a few reasons.
Discounting is bad because…
- It can lessen the perceived value of the product or service being offered.
- It has a holo effect: if I land on your site and see a 20% discount on product A, I now expect to see a discount on product B, too.
- Even if I convert, I’ve now added you in the “this retailer offers great discounts” bucket. Now, when you reach out to me in 6 months for your next amazing product, I’ll only buy it if it’s on sale. You’ve trained me to act based on discounts (Pavlov’s dog).
- If you offer a deep discount, you run into more issues.
“But doesn’t discounting improve conversions?”
Sure, but at what long term cost to your business?
So, don’t have a discount first approach.
But …
Sometimes, retailers do offer discounts. This is reality.
My advice is that when you offer a discount wrap it around a compelling story. That way you can discount, improve conversions, and not hurt your brand.
The trick is telling a compelling story (related post: Anatomy of a Compelling Story). Let your visitor know that the discount isn’t the norm, they’re just lucky to have stumbled on it.
This has 2 benefits:
1: It makes the user feel lucky to have visited your site today versus 2 months ago.
And 2: it let’s them know this isn’t the norm. Now the user hasn’t added you to the dreaded “this retailer offers great discounts” bucket.
There are 2 types of discounts
1: Good discounts
I was on Withings and decided to pull the trigger on their beautiful Steel HR 40mm Black watch. It helped that it was discounted by $60. However, as we discussed above, discounts can be dangerous.
Here is how I would have solved this. I would have added a link that said, “Why the discount?” (notice the link right below the $119.95 price). Note: Withings isn’t a client. This is a made-up example to illustrate our copywriting process.
And on click I would have shown a popup message like this:
Had you visited this page in February you would have seen the full price. We don’t discount often. But, we want to encourage shoppers to up their fitness game. And since the weather outside is improving we thought, “Why not? Let’s give a little boost to encourage shoppers to take their fitness to the next level.“
This is literally the only way to offer a discount and not hurt buyer psychology.
2: Deep discounts
We can see from the example above that Withings isn’t a deep-discount retailer. They just had a sale running.
But what if you are a discount retailer where every item is discounted?
The challenge with deep discounting
Price elasticity states that as price goes down, demand goes up.
And this is why discounts improve conversions. To a point.
A full-priced item discounted by 20% should generate a 20% lift in unit sales. At least that’s the expectation.
Increase the discount by another 20% (on top of the original 20%) and expect to see a corresponding ~20% lift.
But this logic doesn’t continue for deep discounting.
Why? Because buyer psychology starts shifting.
First, let’s understand what’s going on:
Consumers are used to seeing a 20% discount.
We’re not used to seeing 80% discounts. So when we see those some of us start to wonder…
“Wait, why am I getting this insane discount, what don’t I know?”
We start considering scenarios:
- Is this item about to be phased out?
- Could there a defect with the item I’m not aware of?
- Is this company about to shut down? Inventory liquidation? If so, will I be able to make a return?
As you can see, a lot of chatter happens in the mind of the shopper.
Example of a deep discount retailer
Privé Revaux (not a client) is a manufacturer and seller of affordable, high-quality glasses. One of this company’s biggest selling points is their low prices. However, prices that are too low can have a negative effect on conversions. Price sensitivity is an important variable to address on all sites.
In the below image from one of Privé Revaux’s product pages, you can see that the pair of glasses is only $29.95. However, for a minority of shoppers—let’s say 10%—such a low price for something that’s typically +$100 seems too good to be true.
How do we convince them that this deal isn’t too good to be true?
To get these skeptical shoppers to stay on the page and convert, we need to use Narrative Control (learn more about Narrative Control). See the changes we made below:
Change 1:
We added a button below the price on all product pages that says “Why such great prices?”
Change 2:
After clicking on “Why such great prices?”, the shopper will see the following lightbox window:
What’s so special about this lightbox window? It directly addresses the concern of skeptical shoppers by explaining how Privé Revaux is able to offer such low prices.
Once these shoppers understand that Privé Revaux can offer low prices due to direct relationships with suppliers (this is hypothetical—Privé Revaux is not an actual client of ours), then more of them will convert.
Don’t show this message on every page
If the user sees the same “Why such great prices?” button on every product page it will look gimmicky. Therefore, my idea is to set a cookie when, during their current session, the user first clicks the button. Now, when this user moves to the next product page they will not see a repetition of “Why such great prices?” button.
Hope you enjoyed this article with 2 examples to explain the psychology of discounts.
Nice to meet you. We are Frictionless Commerce, and over the last 11 years, we’ve thought about just one thing: how do we get online shoppers to convert? We find buyer psychology super fascinating. And once we understand how your site visitor thinks we use our 9 point copywriting process to convince and convert them.
If you’re on LinkedIn much you can should definitely connect with me. On LinkedIn, I post ecommerce conversion ideas every day, multiple times a day.