What You'll Learn...
- The pitfalls of common discount strategies and how to avoid them.
- Proven chef’s tips for crafting discounts that drive long-term profitability.
- How to balance customer acquisition with preserving your gross margin.
- Strategies for fostering loyalty without diluting your brand’s value.
- Innovative approaches to aligning incentives and simplifying your discount offerings.
A satirical guide to butchering your discount strategy
In the world of direct-to-consumer e-commerce, nothing has become a greater sign of confusion and desperation than the borderline frantic approach to new customer acquisition, infamously known as the “welcome offer popup.”
I understand—you have traffic coming to your site, and you want to convert it in any way you can. But if you overdo it, it’ll be like adding too many spices to your dish: Your offering will become unenticing and even offensive.
In this recipe, we’ll contrast the “novice method” with our chef’s “pro tips”—proven through consistent testing to effectively drive profitable, long-term relationships with your customers.
How to craft a novice discount dish (along with chef’s pro tips)
Ingredients
- 1 hearty and overbearing Klaviyo popup
- An overly generous first-order discount (adjust for taste)
- A chunky slice of your gross margin (20% should do)
- 1 spritz of loyalty erosion
- A quickly growing handful of new patron expectations
Novice Step 1: Fire your popup instantly for every customer
Much like an overeager waiter thrusting a menu and a basket of bread into your hands before you’re even seated, we’re going to serve you the popup hot and fast. Who cares if you know what our brand is about or what we offer, here’s a discount right now!
Your email or SMS rep will happily assure you that engagement skyrockets when you serve it up swiftly and super-sized—and a good novice chef will trust that self-reported wisdom without a second thought.
Chef’s pro tip: Serve with patience
Let customers take a look at your “menu” at their own pace. Overwhelming them too soon can leave a sour taste. We’ve found that triggering our popups on a second page or after approximately a 10-second delay can mitigate up to a 3-5% relative loss in transactions, ensuring the offer is only served to those who need the incentive—but keep in mind that for some brands, the most effective thing is to remove them altogether!
Novice Step 2: Trim your gross margin
Making that first sale is the most important thing, right?
So go ahead and slice away a juicy 20% from your gross margin! There’s no need for meticulous measurements! With the surge in top-line revenue, who’ll notice the missing piece (especially with the lifetime margin of these discount-trained patrons)?
Chef’s pro tip: Invest in quality ingredients
Instead of sacrificing your gross margins, focus on emphasizing the value of your products or services! It can be tempting to race every competitor to the bottom, but all you’ll accomplish is attracting discount-hungry flies. We’ve seen up to 20% drops in repeat customer behavior year-over-year when switching to a first-order discount as customers learn never to pay full price for any of your products because there’s a discount right around the corner!
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Novice Step 3: Reduce your most loyal customers on low-heat
This is easy to do, just keep your best dishes exclusive for new customers. While you have trained their palates to savor discounts, returning diners should never expect a second serving at your restaurant. Don’t worry, patrons will never learn they can change tables (or email addresses) to get the freshest deals.
Chef’s pro tip: Cultivate loyalty
No matter what you’re serving your new patrons, make sure to reward your returning patrons with exclusive offers that make them feel like the most valued part of your business. Repeat order incentives should always offer the best deal. This approach discourages customers from using multiple emails and provides a clearer picture of lifetime value.
Novice Step 4: Dilute your core product
Take your core product, the one you’ve painstakingly crafted and spent countless hours and resources refining, and dilute it with discounts until it’s a mere shadow of its original self.
Chef’s pro tip: Preserve your core
Your core product is your signature dish, be very careful about discounting it. If you’re looking to drive more sales for your core product, consider using a low-cost-of-goods product as a gift-with-purchase or, at the very least, offer non-product related savings like free shipping.
Novice Step 5: Lightly toss with other offers to completely confuse the customer
A good customer likes to be surprised and delighted, right? What’s more surprising and delightful than one discount? Twenty discounts!
To truly bring out the complex flavor of misaligned incentives, serve up a smorgasbord of bundle offers, subscription incentives, and other deals that overlap with your welcome discount, rendering them effectively pointless.
Chef’s pro tip: Season thoughtfully
Avoid overwhelming your patrons with too many competing offers. A well-curated promotion that simply and directly encourages good customer behavior is most effective. Here’s one example: By testing progressive cart discounts (the discount rate increases with the total value of items in a shopper’s cart), we’ve consistently driven a relative increase in conversion by 5% and average order value by 10%!
Plating and serving your dish
Novice serving suggestion
Present this complicated and overwhelming dish on a platter of short-lived success and pair it with a glass of self-congratulation for immediate satisfaction, but remember, the aftertaste will be bitter.
Chef serving suggestion
Keep your discounts simple, focused and effective. When your discount strategy is prepared correctly, you will convert your business’s visitors into paying customers, all while helping your bottom line rather than hurting it.
