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Discounts Done Right: Tactics for Targeted Deals That Drive AOV Gains Without Draining Profits

We all love a good deal. Let's be honest, who doesn't get a little rush when they open their inbox and see a discount code just for them? As a shopper, it feels great. As a business owner though, discounts can be a double-edged sword. Offer too many or the wrong kind of deals and you can quickly chip away at your profit margins. But offer none at all and you risk missing out on potential sales.

So what's an ecommerce merchant to do? The key is balance. You want to provide incentives that get customers excited to buy more from you, without resorting to sitewide fire sales that destroy your bottom line. Take a look at these targeted tactics for discounts done right.

Segment Your Audience for Personalized Promos

Mass blasting the same coupon code to your entire subscriber list is leaving money on the table. Instead, get strategic with personalized discounts aimed at specific customer segments. For example:

- Offer 10% off for first-time purchasers - This small starter deal gets new customers placing that initial order to try you out.

- Send birthday coupons - A timely birthday promo makes shoppers feel special. "Here's 20% off just for you!"

- Create student discounts - Attract budget-conscious students with deals on select products.

- Run loyalty promotions - Reward return shoppers who have made 2+ purchases with a VIP savings code.

When you match the right deal to the right shopper based on their purchase history and demographics, you drive higher redemption rates. Just make sure your ecommerce platform has the segmentation and promo tools you need to target discounts.

Incentivize Bigger Baskets with Minimum Spends

Instead of a generic sitewide coupon, try offering a percent or dollar amount off for customers who spend over a minimum amount. Here are some examples:

- 15% off purchases over $150

- $10 off if you spend $75+

- Free shipping on orders of $50 or more

This encourages shoppers to add more to their carts to hit that minimum and unlock the deal. Even after the discount, you generate more revenue per transaction. And you can set varying minimums and discount amounts for different customer tiers. Just keep the minimums achievable. You don't want shoppers giving up because the threshold seems out of reach.

Bundle Strategically to Boost AOV

Product bundles allow you to deliver discounts while nudging customers to spend more per order. Some smart ways to bundle:

- Offer a discounted price when buying a certain number of items together. "Buy 2 t-shirts, get 15% off" or "Buy 3 candles, get the 4th free."

- Curate pre-set bundles around usage occasions like "Birthday Bundle" or "Game Night Bundle." Take care of the selection work for shoppers.

- For affiliated products like ingredients, create kits. Think a "Taco Dinner Bundle" with taco seasoning, shells, salsa, etc.

- Offer accessory pairings like a watch and watch band at a bundled price.

The key is making bundles that provide genuine value to customers based on how they naturally combine products already. That way it doesn't feel forced.

Optimize Site-Wide Promo Codes Carefully

Occasional site-wide deals have their place if done judiciously. Here are some best practices:

- Require a minimum spend to activate sitewide codes, like $75+. This prevents drastic revenue hits from people only buying low-priced items.

- Limit high-discount codes to 24 hours. Contain the duration of steep deals to minimize profit damage.

- Exclude newly launched or best-selling items from codes to maintain margins on top performers.

- Only offer sitewide deals every 2-3 months max, and vary discount percentages. Daily deals drain profits.

- Feature different codes on social media, email, influencer channels. Track redemption sources so you know which channels drive the most ROI on promos.

- Require email sign-up to access codes. Grow your subscriber list as a trade-off for the site-wide deal.

A/B Testing Brings Precision

Take the guesswork out of discounts by A/B testing different variables like code values, durations, product inclusions, and customer segments. Gauge which options produce the highest conversion lifts and AOVs.

Some elements to test:

- Discount amount: 10% vs. 15% vs 20% off

- Duration: 48 hours vs 1 week

- Products excluded: Entire catalog vs newest collection

- Minimum spend: $50 vs $100

- Target audience: Men vs women, high spenders vs new customers

Each test provides data to shape ever-more-effective promos over time. You gain visibility into what motivates different customer cohorts.

Give Sneak Peeks to Spark FOMO

Sometimes just teasing an upcoming discount is enough to nudge sales. Early announcement generates FOMO and gets customers planning their purchases around your deal.

- Give email subscribers a 1-week heads up about an upcoming sitewide sale. Start the buzz.

- Post on social media that a short-term flash deal is coming soon. Build anticipation.

- Add site banners for a "Big Sale Next Week!" Countdown timers amp up urgency.

The suspense factor actually drives sales both before and during the deal itself. Just don't overdo the sneak peeks or they lose impact. Leave enough time in between promos.

Sweeten Cart Abandonment Emails

Don't just send generic "Hey, come back!" messages to customers who bail on their carts. Sprinkle in personalized incentives to complete their purchase:

- Send a 10-15% off coupon code good for 72 hours. But only to cart abandoners who had high-value items like that $150 coffee table in their cart. Focusing on the most profitable recovered baskets improves ROI.

- Remind them of back-in-stock notices they signed up for. "That dining table set you wanted is available again. Plus we'll take 10% off for you!"

- Show them other discounted recommendations based on the original cart contents.

- Position it as exclusive for being on your comeback list. "Because you shopped with us before, here's a VIP discount..."

This surgical targeting for cart abandonment coupons limits discounts to users you know are serious prospects. Way better than just blasting general sales which attract deal-hunters not planning to spend much.

How can I determine the optimal frequency for offering discounts?

Here are some tips to help determine the optimal frequency for offering discounts:

- Look at your sales cycle - If you have a shorter sales cycle with repeat purchases, you can offer discounts more frequently (e.g. every 2-4 weeks). For longer sales cycles, keep discounts farther apart (e.g. every 2-3 months).

- Test different frequencies - Try offering discounts every week, every other week, once a month, etc. Look at the revenue and profit impact over time to see what cadence works best.

- Monitor fatigue - If you see decreasing returns on discounts offered too often, that's a sign of fatigue. Scale back frequency.

- Consider seasonal trends - You may want to increase frequency around major holidays, then scale back during slower sales periods.

- Analyze your customer lifecycle - Offer discounts at milestones like first purchase, repeat purchase, referrals etc. This may naturally space out frequency.

- Look at competitors - If competitors offer frequent discounts, you may need to match frequency to stay competitive.

- Talk to your customers - Surveys and feedback can provide input on how often customers want to see discount offers from you.

- Measure incremental revenue - If a promotion brings in substantially more revenue, it may be worth offering more frequently.

- Set revenue goals - Determine what revenue target you want discounts to achieve and adjust frequency to align.

The optimal balance depends on your business model, margins, industry norms and customer expectations. Continually monitor results at different frequencies to find the sweet spot.

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Common mistakes to avoid when offering discounts:

- Using discounts too frequently - This diminishes their impact and hurts profit margins over time. Avoid offers more than once a month.

- Setting percentages too high - Giving 50-60% off or more eats away at ROI. 10-20% is often sufficient to incentivize purchases.

- Making sitewide discounts the norm - Targeted promos for specific products/segments are much more effective. Site-wide deals should be occasional, careful moves.

- Applying discounts without caps - Put a limit on the maximum discount amount to prevent drastic revenue losses from high-AOV orders.

- Stacking discounts - Letting multiple promo codes be layered creates huge margin hits. Allow one code at a time.

- Not testing thoroughly - Guessing instead of running A/B experiments leaves money on the table. Optimize based on hard data.

- Overlooking order history - Offering first-time buyer deals to loyal customers who have ordered before annoys them. Tailor by purchase frequency.

- Ending codes abruptly - Have start/end dates overlap by 1 day so customers don’t miss a deal that ends while in their cart.

- Hiding terms and conditions - Transparency builds trust. Explain exclusions, minimums, etc. clearly.

- Launching without metrics tracking - Use tracking links and UTM codes to measure performance of each discount code.

- Not monitoring ROI - Look at revenue growth vs. profit change and walk away from deals not performing well. Discounts should produce a net gain.

Maximize the Value, Not Just the Discount

At the end of the day, smart discounting isn't about a race to the bottom. It's about providing carefully targeted promotions that make customers feel valued and incentivized to purchase more. Keep an eye on the bigger picture of customer lifetime value, not just the immediate discount. With strategic offers matched to audience insights, you can give shoppers deals they love while still growing your bottom line over time.

So be selective. Find the promo sweet spot through testing and optimization. Don't leave easy money on the table, but don't go overboard either. Do discounts right, and customers will keep coming back for more. Just maybe not at that 60% off fire sale price point anymore. Prioritize margins while keeping customers happy. That's how winning discount strategy works nowadays.

Maximize the value with AI Explore Prooftiles


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