Discounts in Online Retail: The Advantages and Disadvantages

Discounts have been around for more than a century, with Coca-Cola the first reported company to offer coupons that could be redeemed for a free glass of their signature beverage. Discounts have continued to be used in various ways and for various reasons in retail spaces, and they have made their way to online commerce. For many businesses, confusion can arise as to when to offer or not offer a discount, and whether providing one has any benefits. In this article, we will explore both the pros and cons of offering discounts in your online store or business.

Attract Customers and Acquire New Ones

Everyone loves a good discount, and this is why they can help attract customers to your store. Also, news about your discounts can help bring in new customers. These may be customers who have never heard about your business or brand, or who may have never bought from you because they perceived your prices to be too high.

Also, discounts can help businesses earn repeat customers who may be enticed to make an additional purchase by a discount or promotion.

Creating Exclusivity

We all want to feel special, and this is why we are more likely to buy from businesses we feel cater to our specific needs. Exclusivity gives customers this feeling because they feel not only catered to but also given access to something only they or a few people have access to.

Whether it is VIP discounts or one-time discounts, these promotions create this air of exclusivity. These feelings create better customer experiences, which benefit businesses in various ways.

Helping Get Rid of Old or Unused Inventory

Reducing the price of a product increases the chances that it will be bought. This is why discounts are so great at helping move old or unused inventory.

Discounts Can Breed Negative Expectations

A major disadvantage of discounts is that they can cause negative expectations among customers. When you offer repeating discounts, people can start believing that your products are of a lower quality, or you have been ripping them off all this time. Also, they may start staying away from your business or brand and only shopping when they know they will get a good deal.

Both of these are bad for business and your bottom line overall.

Reputational Damage

If you create your own products and offer too many discounts, people may start thinking that you do not have faith in your products. This often translates to lower quality, reliability, and desirability among customers, leading to reputational damage.

Chasing Customers Away

If you consistently have promotions running on your website, you might notice revenues and sales drop once you remove them. Why? People are already conditioned that they will always get your products at a certain discounted price. If the discount is gone, they may feel like the new price is too high, and they are less likely to buy from you.

Discounts at online stores can be a good or bad thing depending on how they are used. If they are used to create better experiences for customers, they are great. If they create negative perceptions and unrealistic expectations, they can be bad for business.

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