E-Commerce Discounts: Can Too Many Hurt Your Store?

E-Commerce

Question: Can too many discounts hurt an e-commerce store?

Blake: I will speak from experience on that from some e-commerce clients we’ve worked with that, 100 percent yes. That if you’re building your business off of the back of coupon codes and heavy discounts, you are not building to that quite sustainable. You are creating a self-feeding machine, where your shoppers and your visitors are expecting a discount every time they come there and they’re shopping with you because of that coupon code rather than brand loyalty or because they love the product. You build an audience of, kind of, discount seekers rather than an audience of brand advocates which is a very scary place to be in, because if your, kind of, cost of goods goes up, your margins are shrunk, and you can’t ditch that coupon code, so 100 percent yes, too many discounts will hurt your online store.

John Max: Yeah I mean think about it, you know, in marketing and in kind of the backside of marketing, you’re you’re training…training human sounds weird, but that’s what you’re doing, you’re training people on what they should expect from your company, and think about it in terms of there’s a lot of great businesses that have built up quite large numbers off the back of discounting, off the back of things like that, but when they enter into a competitive marketplace, or they find someone who’s creating a better product, they really struggle in that environment, so the best thing you can do is create the best product that you can and every once in a while, I mean I think discounts on a certain frequency and cadence are good, especially if you’re holding inventory and you need to get rid of it, things like that, but yeah, I mean think about…think about…and take a, take a second to understand what you’re training your consumer to expect from you as a company, through your messaging, through your sales, through your buying process, through everything.

Blake: and I think too, you’re going to squeezed from two directions, you’re going to get squeezed on the low end from somebody coming at you with a cheaper product and then you can very easily get squeezed in the high end too if somebody comes out with a more competitive, better version of what you’re selling, because then you can’t move either direction and you’re kind of stuck on a ship with no sails, basically 

John Max: And you’re optimising for the bottom of the barrel at some point, I mean there’s you know being the low-cost leader is never a sound business model if you want to go big. Perfect 

Blake: Yep 

John Max: that’s the episode for today. Question of the day?

Blake:  Oh man! I want to hear stories about coupon codes or discounts gone wrong. I know working the past couple years in e-commerce, we’ve had some discount codes go out with too heavy or no expiration dates and that kind of thing, so I want to hear kind of our audiences take on what’s the worst discount code mishap you’ve had.

John Max: Thank you all for stopping by and we’ll talk to you all tomorrow.

Written by
John James, M.D. is the CEO of Engine, a modern cloud-hosted ecommerce platform. I paid for medical school with an ecommerce business I founded in my dorm room over twenty years ago, and eventually raised over $100 million in venture capital running Acumen Brands. Email me -- john at enginecommerce dot com.