Ecommerce discount strategy: when discounts hurt (and what to do instead)

A discount strategy is your plan for when you lower prices, for whom, by how much, and why. Without one, discounts happen whenever sales feel slow, and the store ends up "on sale" half the year.

It's also called promotional pricing or discount pricing. Common forms: a sitewide sale, a dollar amount off, a code for one group (like new subscribers), a spend threshold ("spend $100, save $20"), quantity deals like BOGO, and bundles.

Usually, yes. The real question is whether it brings in more profit.

Price is a powerful lever in both directions. In "The Power of Pricing," published in McKinsey Quarterly, Marn, Roegner and Zawada used the average S&P 1500 company to show that a 1% price rise would lift operating profit by 8% if sales volume held steady. They also point out the reverse: a 1% price cut would lower it by the same 8%. A small cut in price takes a big bite out of profit.

Here's the math most owners skip. Your margin is what's left of a sale after product cost, shipping and payment fees. A discount comes straight out of it, so you need more orders to earn the same profit. The formula: extra sales needed = discount ÷ (margin − discount).

At a 50% margin, 20% off needs 67% more orders just to break even. Very few sales do that. To compare a discount with a free gift or BOGO on the same product, see our worked example in BOGO vs gift with purchase vs discount.

Look at the top rows of the table. Below about 40% margin, even a modest sale needs a huge jump in orders. Offers that add value beat offers that cut price.

This is discount fatigue. If there's always a code, full price starts to feel like the "wrong" price. In a study in the Journal of Marketing Research, Mela, Gupta and Lehmann tracked over 8 years of shopping data for a packaged good and found that consumers became more price and promotion sensitive over time as promotions increased. Sign to watch: sales drop sharply in the weeks between promos.

A sitewide sale gives the same cut to your loyal fans as to new shoppers. A big code box does too: Baymard Institute notes that promo fields are distracting and encourage some users to leave checkout to hunt for coupons. Some don't come back.

Research in the Journal of the Association for Consumer Research found that when a brand is promoted often, shoppers can get used to a lower "normal" price, and a lower normal price tends to go with lower quality ratings. That matters most for premium and gift brands.

If people only buy during a sale, ask why. Often the product page doesn't answer questions about size, shipping or returns, and the discount does the convincing. Our guide to traffic but no sales walks through where to look.

When a store tells us sales only come in during a promo, the price is rarely the real problem. The page never gave people a good reason to buy at full price. Fix that first, and the discount becomes a choice, not a habit.

Of the 25 top stores we broke down page by page, 9 show a crossed-off price next to the sale price. When they discount, they make the saving easy to see, and the smart ones tie it to a bigger order.

You don't have to stop running offers. Pick ones that cost less, or only cost you when the order grows. Here's the order we'd try them in.

Of the 25 top stores we broke down, 11 offer payment plans, 15 show a free shipping threshold or confirm free shipping in the cart or checkout, and 12 make a guarantee or returns promise. Bodybuilding.com protects its price without a big sale:

More on how to increase average order value and price a bundle that still makes money.

These change how a price feels, not what you earn:

A good ecommerce pricing strategy starts before any promo:

The smallest one that changes behavior. Start lower than you think (10%, not 25%), or try a gift instead. Keep codes for moments where they earn their keep:

On Shopify, discounts come in 3 types, according to Shopify's help center: amount off (products or the whole order), buy X get Y, and free shipping. Shopify says each type can run as a code or apply automatically in the cart and at checkout. Want to mention the offer next to the pay button? Shopify's one-page checkout is the default, and custom text inside the checkout steps needs Shopify Plus. On other plans, show it on the product page and in the cart.

Revenue always looks good during a sale. Judge it by profit per visitor: revenue minus product, shipping and offer costs, divided by everyone who visited.

At FunnelSpark, an ecommerce CRO agency for Shopify stores, we call a test a win only when it beats the current page at 95% confidence on orders or revenue per visitor. You need traffic for that: proving a 10% lift at a 2% conversion rate takes about 161,000 visitors. With less, use customer feedback and faster signals like add-to-cart rate. More in our guide to ecommerce A/B testing.