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Tips, advice, and information for South African business owners

06 Mar

Should You Double Discount?

Discount promotions are a popular tactic for boosting sales, but they need to be used sparingly or you’ll end up training your customers to only buy when you’re running a special. So how can you get maximum bang for your buck if you use discounts infrequently?

One intriguing possibility is to break from convention and offer a double discount instead of a standard, once-off reduction. For example, you might offer your customers a 25% markdown and then extend another 25% concession instead of leading with a single all-inclusive discount. This tactic has several benefits.

First, the novelty of a multi-discount offer can spark word of mouth and generate more interest in your campaign than a routine promotion.

Second, you can use successive markdowns to incentivise specific tasks that you want your customers to complete. For example, you might offer a discount on a particular product or service, and then entice your customers with a bonus concession if they buy something complementary, share their purchase on social media, or sign up for your mailing list.

Third, with some cunning mathematical manipulation, you can use multi-discounts to inflate perceived benefits. For example, many people will assume that marking something down by 25% after an initial 25% concession will equate to a half price deal. But it actually works out to a net discount of 43.75%.

If you’re keen to give double discounting a try in your business, then think carefully about how you structure the promotion. As a recent RIMtailing article highlights, the effectiveness of multiple concessions will vary depending on whether the second discount is a surprise or not.

Researchers from the University of Virginia and Virginia Tech found that customer perceptions are skewed by the first markdown when they are exposed to multiple discounts simultaneously. So in these circumstances, you should structure your promotion such that the first concession is also the biggest.

However, when customers have been exposed to a discount offer and are looking forward to redeeming the concession, only to be surprised by an additional markdown, then the second discount has more impact. So in these situations, you should make the second discount larger than the first.

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