Discounting has become a go-to strategy for boosting e-commerce revenue. You’ll see it regularly – 30% off, 50% off, buy one get one, friends & family sale, or gift with purchase. While it comes in many forms, it’s all still a discount.
While going on sale can quickly increase revenue and improve paid media performance, regular sale campaigns can hurt your business in the long term.
Let’s take a look at how regular discounts can harm your business and why it might be time to rethink your sales strategy.
Why are Constant Sales & Discounts Bad?
I’m not saying that all discounts are bad and that you should never go on sale, but when you solely rely on discounts for driving revenue, you hurt your brand’s long-term success.
Here are a few things we see from brands that go on sale too often.
The Post-Sale Slump
While nothing is more exciting for a brand than seeing the instant growth and revenue from launching a sales campaign, the slump that comes after is terrifying.
Brands see a drop in revenue post-sale as customers who may have purchased in the future are pulled forward and instead purchase during the sale period. This post-sale drop can sometimes lead brands to go on sale again – creating a sales cycle that is hard to break out of.
It’s crucial to understand that while sales can provide a short-term boost, they can also set the stage for a challenging recovery period.
Consumers Start Waiting
Regular discounts do more than just impact revenue; they also play a pivotal role in shaping customer behavior. Over time, customers become sale-savvy, holding off on purchases until the next sale event rolls around.
This ‘waiting game’ can severely impact regular-priced sales, creating a dependency on discounts that are hard to break.
As a business, it’s essential to foster a customer base that values your products at full price, ensuring a profitable and high-margin revenue stream.
You Stop Innovating
When sales campaigns consistently lead to revenue, it’s easy to fall into the trap of discount-driven success. The brand starts to focus on its sales strategy and discounts at the expense of product innovation.
Why invest in improving the product when slashing prices seems to do the trick?
This short-sighted strategy can hinder long-term growth and brand development. It’s imperative to invest in new products and product improvement to help continue to grow the brand.
You Hide Product Market Fit Issues
Discounts can also serve as a red flag, highlighting potential issues with product-market fit. If a product only seems like a good deal when its price is reduced, it raises questions about its perceived value at full price.
This discrepancy can indicate deeper issues with the product or its positioning, which discounts only serve to mask, not resolve.
It’s vital to address these issues head-on, ensuring that your products meet customer needs and expectations at every price point.
You Hurt Major Sale Events
For many brands, major sale events like Black Friday and Cyber Monday are pivotal for revenue generation. However, if customers have become accustomed to regular discounts throughout the year, these once-lucrative events lose their appeal and effectiveness.
The allure of a ‘big sale’ diminishes when sales are a dime a dozen, making it challenging for businesses to capitalize on these crucial retail moments.
By reserving discounts for truly special occasions, you can restore the impact of major sale events and maximize their revenue potential.
What Should You Do Instead?
Reducing the number of sales you run doesn’t mean you’re left without strategies to quickly increase revenue.
Instead, it opens opportunities to strengthen your brand and create a more sustainable revenue stream. Here are three areas you should focus on instead:
Invest in User Experience
User experience can set you apart from the competition (and retailers), encouraging customers to choose your brand over others, regardless of price.
You should focus on optimizing your website’s usability, improving customer service, matching competitor shipping and return policies, and ensuring that every touchpoint with your brand is positive.
When customers have a seamless and enjoyable experience, they’re more likely to purchase and become repeat buyers.
Launch New Products
Product innovation is key to keeping your brand fresh and relevant. Regularly introducing new products keeps your inventory exciting and gives customers a reason to come back beyond waiting for the next sale.
You should be thoughtful in how you launch your products. Ensure that your new products align with your brand and meet your customers’ needs, solidifying your position in the market. You need a strong product strategy and make sure you’re listening to your customers’ needs.
Launch Collaborations with Partners
Collaborations are a great way to build buzz around your brand, attract new customers, and provide existing ones with something unique.
Partnering with another brand or influencer could be as simple as a joint VIP event or new content series, or it could be as comprehensive as a new collaborative product design or idea.
When working with partner brands or influencers, make sure their values and target audiences align with yours.
These collaborations can drive sales without the need for discounts while also improving the brand’s value and reinforcing the brand’s positioning.
Embracing a future where discounts are not a regular lever for revenue might seem daunting, but it’s a strategic move toward sustainable growth and brand strength.
The best brands understand that it’s imperative to foster a loyal audience that appreciates its products beyond their price tags (moving from a nice to have to a need to have).
As you shift away from the discount-driven cycle, you’ll find your business standing stronger, resilient in the face of market changes, and poised for enduring success.