Top 10 Advantages of Discounts: Maximize Profits & Loyalty

Discounts are important in influencing retailing, businesses, and customers. Over 80% of U.S. consumers sign up to receive email offers, and 93% of consumers make repeat purchases at a retailer that offers good discounts.

When implemented effectively, discounts can increase profits, bring in new customers, and retain old ones. In this blog, you will get to know about the top 10 advantages of offering discounts and how they can be a powerful tool to get profits and boost customer loyalty.

Advantages of Discounts

Discounts attract new customers, ensure repeat purchases, clear the inventory, and facilitate cash flow. Here are some key advantages of using discounts to achieve these goals.

1. Attract New Customers

Discounts are one of the most efficient methods of advertising that any business can use to get the attention of customers. A well-placed discount or promotional offer can encourage otherwise reluctant potential customers to make a first purchase. The new consumers who have made the purchase successfully are likely to rebuy the product making them loyal consumers of the product and brand.

2. Boost Sales Volume

Whereas discounts cut down the product's price, they also act as an incentive to encourage the purchase of more of the particular product. By offering the product at a lower price, the customer feels that they are gaining more value for their money, which makes them make the ultimate impulse purchase. This is a wise strategy to use, especially when particular businesses or products have festive seasons or clearance sales.

3. Clear Out Old Inventory

Every business faces things such as slow-moving stock or some goods that became nonpopular during a certain period. It is realistic to use discounts because they help to get rid of old products that stand in the way of new products becoming popular. This not only assists in stock management but also reduces wastage of a product.

A very good example of this is Steve Madden. On Cyber Monday they provided a massive 40% off with a specific promo code for their existing customers, sent via an email campaign. The company announced that it will provide only limited stocks for six hours up to midnight. This strategy not only helped clear out old inventory but also rewarded loyal customers with significant savings.

4. Improve Cash Flow

Cash flow is a necessity of any business and organization. This means that discounts can be of benefit to cash flow since they encourage customers to purchase goods and services before they go out of trend. This is especially important for companies during periods when sales revenues are low or during an economic recession where the amount of cash is required to meet all financial requirements and expenses as well as to fund expansion.

5. Increase Customer Retention and Loyalty

Now and then, it is possible to give certain percentage discounts to customers to develop loyalty. People anticipate that they will get value from businesses through coupons and discounts. Businesses can use loyalty programs as a method of earning customer loyalty and guaranteeing future purchases.

6. Enhance Brand Awareness

Discounts may help improve brand awareness when planned strategically. Every time a brand comes up with a sale or any offer, it comes up on various channels, social media, blogs newsletters, and so on. It not only leads to the gain of new customers but also acts as a reminder for previous customers.

Old Navy sets an example for how to create brand awareness using discounting. They have promotional campaigns like "Super Cash, where the customer earns a discount voucher on their next purchase based on how much they spent in the store. At that moment, customers are encouraged to spend money, with the hope they return later. With ongoing promotional campaigns like these, customers are encouraged to shop at Old Navy again. These campaigns are often advertised through various channels, including social media and email, to maximize reach and engagement.

7. Gain Competitive Advantage

It is seen that in a competitive industry, the companies offering discounts also get the edge over the competitors. That is why a discount at the right time can help with capturing a segment of the market share that would go to other companies. By charging a relatively low price that is lower than that of competitors, companies can influence customers to go for their products.

8. Encourage Bulk Purchases

It is always a good selling strategy to consider a variety of discounts for anyone who wants to make large purchases at once. Customers who want to use less money may opt to utilize their money by purchasing more cheaper products. This approach is ideal for products that have a long life cycle or perishable products that customers get for daily use.

An excellent representation of the bulk purchase-selling approach through couponing is seen with Costco. Their membership program enables customers to buy items at discounts. For example, the members are frequently allotted coupons that save even more money to buy bulk already-discounted items along with groceries and household goods. Through this approach, the supermarket not only inspires consumers to buy bigger quantities but also makes them more regular customers with the help of exclusive deals.

9. Increase Customer Engagement

One of the benefits of providing discounts is that customers may engage more with that brand. Examples of such promotions include sales promotions, special offer promotions, and membership promotions all of which increase impulse buying because they come with a limited-time offer. Such promotions are usually accompanied by increased website traffic, more clicks, and better conversion.

10. Gather Customer Data for Future Marketing

Coupon promotions through different channels is another way different businesses can get valuable information regarding their customers including their e-mail addresses, buying behaviors, and even their preferences. This can help sell relevant products and services, perform targeted marketing, and provide improved services, thus leading to satisfied customers and better sales.

Disadvantages of Discounts

• Offering discounted prices can cause customers to regard your brand as less or lower quality, which can have adverse effects on your brand image and the market it is positioned.

• Providing discounts can create loss of profit because of the decrease in the profit margin, this can be extremely dangerous for small companies or those with lower profit margins.

• Discount promotion inevitably leads to leisure buyers: Nevertheless, discount offers might encourage customers to purchase only when discounts are available, later leaving them with the problem of irregularity in sales and cash flow.

• The outcomes of regular discounts are that they initiate a furious competition on prices, with businesses dropping their prices to win a match which in the end brings losses within the industries.

Best Types of Discounts

• Percentage Discounts: Discounts such as ''20% off are quantifiable and acceptable to everyone in the market. They are perfect for creating awareness for overall store promotions or particular category products.
• Buy One, Get One (BOGO) Offers: These offers persuade the customers to purchase products in large quantities where the price of another product is given for free or at a lesser price. This is useful for making space or popularizing other products usually sold with that particular product.
• Flash Sales: Limited-time discounts create urgency, driving customers to make quick purchasing decisions. Ideal for boosting short-term sales and clearing stock quickly.
• Loyalty Discounts: Special discounts for returning customers or members of a loyalty program. These build customer retention and encourage repeat purchases.
• Free Shipping Offers: Offering free shipping on orders above a certain amount can encourage customers to buy more to reach the threshold, increasing overall sales.
• Referral Discounts: Discounts are given to customers who refer new customers. This helps in acquiring new customers through word-of-mouth marketing.
• Clearance Discounts: Deep discounts on end-of-season or outdated stock help clear inventory, making room for new arrivals.
• Student or Senior Discounts: Offering discounts to specific groups like students or seniors can help attract a targeted demographic, building goodwill and customer loyalty.

Conclusion

Discounts are a win-win strategy for both businesses and customers. While customers enjoy the savings, businesses benefit from increased sales, customer retention, and enhanced brand visibility. When implemented thoughtfully and strategically, discounts can maximize profits and foster long-term customer loyalty. Whether you’re a small business owner or a large retailer, understanding the advantages of discounts can help you drive growth and stay competitive in the market.