Before diving into the world of ecommerce, we must first acknowledge the dominant force in the industry: Amazon. Originally known for its dominance in direct-to-consumer sales, Amazon has expanded its reach into the call center software market with its latest offering, Amazon Connect. This ecommerce giant accounts for nearly 50% of all online shopping purchases of all online sales. Furthermore, Amazon boasts a membership base of over 100 million Prime subscribers. Many businesses find it incredibly challenging to compete with Amazon’s low prices and complimentary two-day shipping. While challenging, it is not an insurmountable obstacle. One highly effective strategy for competing with this retail behemoth is through the strategic implementation of discounts, which are potent tools in their own right. By coupling these discounts with well-crafted PPC advertising campaigns, businesses can achieve remarkable success.
While some may perceive offering discounts as undervaluing one’s products or services, assuming customers will pay full price for quality, this is a misconception. In reality, discounts serve as a powerful form of advertising for businesses. In the following sections, we’ll explore the reasons behind the effectiveness of discounts and unveil six highly potent discount strategies to incorporate into your PPC campaigns, enabling you to leverage their power for driving sales. Let’s begin!
The Psychology Behind Ecommerce Discount Success
Two key psychological principles underpin the effectiveness of discounts. Firstly, discounts introduce a sense of urgency, a form of social proof, as most are available for a limited time. This FOMO is powerful motivates individuals to finalize purchases they may have been contemplating. This urgency is a significant factor contributing to the success of events like President’s Day and Labor Day sales. Moreover, the way discounts are framed influences their effectiveness. Even the same discount can yield different results based on the wording used. For instance, many consumers respond more favorably to discounts presented as “Save $X” compared to “$X Off.” Despite both resulting in the same final price, saving implies mitigating a loss, while a specific amount off signifies a gain. This difference highlights the second psychological aspect at play: Humans are generally more strongly influenced by loss aversion. In simpler terms, we are often more motivated to avoid negative outcomes than to pursue positive ones. This principle explains why someone might avoid skydiving to prevent a potential broken leg, even if they believe they would enjoy the experience (assuming they haven’t already experienced a skydiving injury). The desire to avoid loss is, in many cases, more compelling than the potential benefits we might gain. Let’s consider an example involving airline credit cards like the ones shown below:
Source You may find the 40,000 bonus miles and $50 credit offered by the Gold Delta SkyMiles card appealing. However, upon noticing the $95 annual fee after the first year, you might opt for a card without an annual fee to avoid the extra cost. Here’s another illustration: Imagine you’re an avid ocean swimmer, indulging in this activity at least twice a week. One day, you have an unfortunate encounter with a large jellyfish during your swim. As a result, the thought of entering the ocean again fills you with dread. Despite years of swimming without incident, this single negative experience has a profound impact on your behavior. The possibility of another jellyfish sting (the loss) outweighs the enjoyment you derive from swimming (the benefit). This phenomenon is loss aversion, and it exerts a powerful influence whether the perceived loss is financial or related to a potential unpleasant experience. Now that we’ve established the psychological underpinnings of why discounts resonate with consumers, let’s explore some of the most effective discounts to integrate into your PPC advertising campaigns. Here are six incredibly impactful PPC discount strategies to test with your target audience.
1. Tiered Discounts: 20% Off Orders Over $50 or 30% Off Orders Over $100
Increasing the amount each customer spends is a straightforward yet effective way to enhance your bottom line. Consider this: Whether 20 customers each spend $10 or four customers each spend $50, the overall sales revenue remains the same. However, acquiring four customers typically incurs significantly lower PPC costs compared to acquiring 20 customers. Furthermore, offering “X amount off $50 orders” encourages customers to reach that minimum spending threshold, leading to increased time spent on your website. As customers browse longer, the likelihood of exceeding the $50 minimum purchase requirement increases. Incorporating a “Buy More, Save More” element, such as 30% off orders over $100, further incentivizes higher average order values (AOV). While the business benefits are evident, let’s examine why this approach resonates with customers. Take a look at this coupon from Carter’s, a children’s clothing brand.
Carter’s enhances its 20% off $50 offer with free shipping, making it even more enticing. Moreover, highlighting other discounts and clearance items creates a perception of exceptional value for customers. This strategy motivates shoppers to reach that $50 spending target. When customers are just a few dollars shy of the threshold, the perceived value of that final item increases significantly. Housecall Pro, an online software platform for home service businesses like plumbers and electricians, employs a 33% discount, which is more visually appealing than a standard 25% or 30% off.
Experiment with different discount rates to identify what resonates best with your audience, but avoid going below 15%, as this can diminish the perceived value of the offer. If profit margins are a concern, consider offering a flat dollar discount, such as $5 off, instead of a percentage-based discount.
2. Capitalizing on Black Friday/Cyber Monday: 40% Off
Black Friday, and increasingly Cyber Monday, has reigned supreme as the most popular shopping day for several years running. Notably, ecommerce is capturing an increasingly larger share of Black Friday sales, with online sales witnessing a 16.7% in 2018 surge while brick-and-mortar sales experienced a decline. However, don’t anticipate customers to be swayed by a mere 20% discount during Black Friday. Consumers have come to expect substantial price reductions, so consider offering discounts of 40% or even higher. Utilizing uneven numbers, which tend to attract more attention, is also a viable strategy. Take a look at this advertisement from Old Navy.
Instead of simply relying on visual cues like the strikethrough pricing shown above, employ language such as “Save 40%,” which effectively triggers the loss aversion principle we discussed earlier.
3. Clearing Inventory and Generating Excitement: Seasonal Sales
The most favorable deals benefit both parties involved. Seasonal transitions present an excellent opportunity to clear out excess inventory while offering customers compelling discounts. Consider Macy’s, which hosted a clearance/blowout sale at the end of summer to make way for fall and winter merchandise.
When offering substantial discounts, maximizing the attention and traffic generated by the sale is crucial. For instance, encourage customers to subscribe to an email blast or generate anticipation for upcoming products to foster ongoing relationships beyond one-time purchases.
4. Leveraging the Fear of Missing Out: Retail Holiday Sales
The fear of missing out (FOMO) is a powerful motivator, which explains the popularity of limited-time sales during retail holidays such as Presidents Day, the 4th of July, and Labor Day. We are inherently averse to missing out on a great deal! Vineyard Vines, a well-known casual apparel brand, maximized its participation in the recent President’s Day sales event by offering a 30% discount on select styles.
Ecommerce businesses can further amplify the impact of retail holiday discounts by combining them with other popular discount strategies, such as offering a specific amount off a $50 purchase or providing free shipping.
5. Mitigating Risk and Encouraging Trials: Free Trial Offers
Which discount proposition sounds more appealing: 10% off your first year or a free 30-day trial? The majority of consumers would gravitate towards the free trial option, as it implies greater value. For instance, if someone is evaluating different password manager solutions, they might feel overwhelmed by the sheer number of choices. Deciding on the best option can be challenging, especially for a subscription-based service, as there’s inherent risk in committing without knowing if the product meets their needs. A compelling call to action offering a free trial, like the one employed by Manage Engine, can effectively reduce decision fatigue and encourage purchases by mitigating risk.
Moreover, popular website builders simplify the implementation of exit-intent pop-ups or banners, enabling you to promote your free trial offer to potential customers as they navigate your site. Once a customer signs up for a free trial and starts using your password manager, they are less likely to switch to a competitor (assuming your product delivers a positive user experience) due to the effort involved in migrating their data and adjusting to a new system.
6. Eliminating a Major Purchase Barrier: Free Shipping
While shipping costs might seem relatively insignificant, often amounting to just a few dollars, they can be a one of the most powerful discounts you can offer. for many online shoppers. In fact, a survey revealed that shipping fees were a primary reason behind 52% of shopping cart abandonment. The allure of free shipping is so strong that it has even inspired memes, like this one:
Source In the realm of PPC advertising, offering free shipping can be a potent differentiator, particularly when competing against industry giants. Considering Amazon provides free shipping on most orders, not offering this perk (even if your products are slightly pricier) helps create a more level playing field. Pretty Litter, a company selling color-changing cat litter that serves as a health indicator, incorporates free shipping into its Google Ads campaigns.
This strategic move provides a significant competitive advantage, especially when compared to much larger ecommerce players such as Tidy Cats, Chewey.com, and Walmart. The power of free shipping extends to social media advertising, a channel known for its high cost-per-click. Pretty Litter, for example, highlights free shipping in its video advertisements. They double down on discounts by offering both free shipping and a 20% discount.
The key takeaway here? To effectively compete against Amazon, offering free shipping is paramount. Consider implementing free shipping on orders over $50 as a starting point.
Harnessing the Combined Power of Ecommerce Discounts and PPC
Don’t fall prey to the misconception that “discounts will destroy your business”! When employed strategically, discounts can significantly enhance your PPC campaigns, enabling brands to stand out in a competitive landscape dominated by major players like Amazon and Walmart. Begin by experimenting with the discount strategies outlined in this article, and remember to A/B test to identify which discounts resonate most effectively with your target audience!