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Flash Survey: How Do You Discount?

The Question:

What type of discount do you use most frequently for your site?

The Results:

Analysis of Results:

We received a strong response to this query. It’s a question of great import to retailers as discounting is equal amounts art and science. There are many considerations that can and should affect how much to discount, when to discount, and whether, frankly, to discount at all. Your brand, your category, your margins—all of these weigh heavily upon the calculus of the discount.

Our Flash Survey respondents are big fans of discounting, with 82 percent of respondents indicating a willingness to offer discounts or incentives to make a sale. The top two types of discounts were 10 percent off (23.1 percent) and free shipping (20.6 percent). These responses correlate with internal data at Spring Metrics, where the largest percentage of our Smart Offers customers offer discounts of 10 percent.

But are discounts the only way to go? Some research suggests not. In a study conducted by the University of Minnesota’s Carlson School of Management, researchers learned that shoppers prefer to get something extra for free than to receive a discount on what they already plan to purchase. Why is this? Because consumers are terrible at this sort of math. A 50 percent increase in quantity is the same as a 33 percent reduction in price—but most consumers perceive the 50 percent increase in quantity as the superior offer. This is a valuable insight to keep in mind when crafting your own discounting strategy.

Other studies have shown that double-discounting can raise the perceived value of the discount. For instance, if you discount a product 20 percent, then discount it again 25 percent, the final discount is 40 percent. But shoppers perceive the double discount as more attractive than a simple 40 percent discount. Bottom line, online retailers: know your math!