How to Choose the Right Discount Strategy for Your Shopify Store
Most Shopify merchants start out with a single discount mechanic, and a single channel to promote it: a site-wide, percentage-off code shared across their social channels, and it's enough to see them through their first few hundred orders. But as a merchant begins to scale beyond that initial acquisition phase, a single blunt discount begins to erode more margin than it gains in additional revenue. Choosing the right discount mechanic for your catalog and customer behavior is one of the highest leverage tweaks a growing merchant can make.
Define what you want to accomplish
Before choosing a particular discount mechanic, define the particular purpose it should serve. Vague goals like "increase sales" are not useful - consider the different ways you might want to drive sales, and what kind of discounts are appropriate to each.
- If you need to clear inventory, you'll want a steep product-specific percentage discount with an obvious expiry date
- To increase average order value, you may want to employ quantity- or bulk-based mechanical discounts
- For reducing cart abandonment, discounts that only appear when a customer has added a certain amount to their cart are appropriate
- And to reward loyalty, discounts may be based on a customer's order history, rather than a global code.
Bulk and quantity discounts are most useful for consumables or regularly-replaced items
Any product that a customer is likely to purchase more than once has a natural "bulk" purchase size - for supplements, this may be a bottle of pills; for pet food, it may be a bag; for businesses, it may be packaging materials. Mechanical discounts on these sorts of products almost always outperform a generic site-wide code, and have a predictable impact on your margins: you're discounting the additional units purchased at a known rate, rather than throwing away margin on every order. The most effective way to implement this sort of discount is to make the relevant unit price visible on the product page itself, rather than in a checkout modal or in code.
Discounts that increase with cart value are safer for your margins than site-wide percentage codes
A 10% site-wide code will always reduce your margins, since it discounts all orders, including those that would have been profitable at a higher price. Cart-value tiers, such as a free shipping threshold at $50 and an extra 5% off at $100, only provide a discount to orders that cross a certain value, which provides a better value to you, the merchant: you pay for the discounted order only if the customer has bought enough to make the average order value worthwhile. This sort of discount is also much easier to measure, since you're only paying for the increased traffic if you can demonstrate a positive effect on gross margin.
Avoid complicated interactions between multiple rules
While it may be tempting to apply a combination of quantity discounts, value tiers, and seasonal discounts at the same time in order to drive sales, in practice these interact in unpredictable ways that muddy the waters when it comes to analyzing performance. It's much more useful to measure the effect of a single clear value proposition - one well-worded announcement and one prominent call to action - than to try and untangle what impact a 20% seasonal code has on top of a cart-value threshold.
Focus on margin gains, not just conversion rate boosts
If a particular mechanic boosts your conversion rate while simultaneously cutting your margins, it's not a worthwhile tactic. Any new discount mechanic should be tested on a smaller set of products or a shorter time window before being rolled out more widely, and should be evaluated in terms of margin contribution per visitor, rather than overall volume.
If you're interested in tools that let you apply quantity discounts or cart-value thresholds without custom development, see our analysis of cart-level discount apps; or get in touch - we develop and maintain discount tooling for Shopify stores as part of our app development practice.