Effective use of discounts by e-commerce

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Effective use of discounts by e-commerce

“Why are my sales not increasing, even though I am offering huge discounts”? This is a question that is often asked a lot when it comes to sales in general. May be, you are probably asking yourself the same question now, because you have literally tried all types of discounts in trying to increase your sales, yet there are no improvements.

It’s just hard sometimes to believe that others are making progress with the same thing you are doing, but you are not. Some even go to the extreme of associating the failure of their strategy to witch craft and so on. Well, thank God you are here. There will be no need to think that the reason why your strategy is not working is because of witches after reading this article.

What are discounts

Before we jump in to talking about the effective use of discounts, it will be good to at least know what discounts are. A discount in general, is simply a reduction in the price of something. Usually, most ecommerce websites offer what we call percentage discounts in order to induce their customers to buy their products. I am sure you have seen or, perhaps tried to promote your sales by offering some percentage reductions in the prices of your products. When you visit most ecommerce sites, you are likely to see something like -10% or -30% from 5-15 units. These are forms of discounts.

There are many reasons why people reduce the prices of their products. These include

  1. To induce customers to buy more
  2. To clear their stores in order to avoid expirations or to enable them receive new supplies(clearance sales)
  3. To motivate their distributers and middlemen for the role they play in the supply chain.

Now that we know the basics of what discounts are and why people use them, we can now go in to how to use them effectively, in order to boost our sales.

How to effectively use discounts

The reason why most discounts strategies fail is because they are applied to the wrong products. Some products react very well to price changes, while others do not. So, if you were to apply the discounts on products that do not react very well to prices changes, you will still have low sales though you have reduced the prices of the products.

Let’s take for instance salt. Do you think if I reduced the price of salt from Ghc1.50 to Ghp0.80, people will buy more salt?  More people will buy from you but, the quantity per house hold or the quantity one person will buy, will not change.

 

 

But on the other hand, if you were to apply the discounts on products that react very well to price changes, then you are most likely to get the right results.

Let’s take for instance rice, if you were reduce the price of a bag of royal feast rice from Ghc150.00 to Ghc80.00, do you not think, that does who would have bought 1bag may now buy two or three bags?

This is what is called the Elasticity of demand in economics. The proportionate change in quantity bought due to change in price. This in simple terms means; how people react in terms of how many they will buy, when a product’s price changes.

In order for discounts to work properly, you need to find the right products to discount. There are products that are very sensitive to price changes (elastic), and there are the once that are not sensitive to price changes (inelastic)

Discounts should be applied to products that are sensitive to price changes. This is because products that are sensitive to price changes will generate more sales than products that are not sensitive to price changes. In the examples above, an ecommerce website that applied discounts to rice will certainly make more sales than one that would be apply discounts to salt.

To get the best results from discounts, follow the steps below;

  1. Read the article on how to grow your ecommerce business. This will help you prepare your business so that when the customers start coming in, they won’t leave for a different reason
  2. Find out the products that are sensitive to price changes. Which products in your list do you think that, if you were to reduce their prices, people will buy more? Find them out.
  3. Apply the discounts on these products.

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