The DEFINITIVE GUIDE to RUNNING DISCOUNTS ON FACEBOOK

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Should we really pay more to make less?

One of the most common “best practices“ is to run a discount as a Retargeting offer to somebody who has “abandoned cart”
The idea being that if we only charge less money, the person would be more likely to buy
While price can indeed be one objection, remember that what we are ultimately doing is paying extra,
by having a dedicated retarded campaign to somebody who we probably already paid to bring to the site,
to make less money,
because we’re giving them a discount
We are effectively paying more to make less
Does a lower margin actually help increase profitability?


What about Black Friday or Mother’s Day sales?

These seasonal sales originated from a retailer‘s needs to clear inventory for new stock
There is a very big difference between being a store that sells products from many brands, and has profit per square foot need in the business model,
versus an e-commerce, direct to consumer business model
Which has a much larger margin available per transaction to customer

Big retailers benefit from the market force of volume and the ability to return items that don’t sell
Direct to consumer brands benefit from the market force of margin, because you don’t need to give a wholesale price to the end consumer
This means that the competitive, and financial, need to lower price in order to clear inventory from the shelf in a store, does not apply to direct to consumer brands


When I run a sale, I make a ton of money

Yes, cash flow on days with heavy promotions tends to be much higher then on those days without any incentive
However, cash flow on the days following sales and promotion periods tend to be far worse than the average day
This is often due to a macroeconomic phenomenon referred to as “pulling sales forward”
Running sales today at a discount, allows someone who would pay full price next week, to pay less today
Yes, this increases the volume of transactions today
But, dramatically reduces the profitable margin per customer journey on all transactions that occur within that period

Put another way,
you spent a lot of money,
to help a lot of people,
pay you a lot less money,
than they would have otherwise

Paying more dollars to make less dollars doesn’t make a whole Lotta cents


Generating long-term value with a business

When we make sales during discount promotions, or with desperate percentage off emails and ads, we are training our customers to devalue the product at full price

If you can always buy an item at 30 to 40% off why would you ever pay full price

What is your perception of a brand and of their price structure when you know that there is always an opportunity to pay far less than what they are asking?


Generating a sale is very different than creating a customer

Making a profit on a single transaction is far less important than curating a customer journey that not only brings a much larger margin, but also generates additional sales beyond that original customer

Brand loyalty and lifetime value of your average customer are directly correlated

The least loyal customer
also happens to be the customer
with the lowest lifetime value to your business

The customer that you “acquire” with a discount, is the least loyal customer you can have


What about bundles and upsells?

This is where the real money is made
Rather than giving a blanket discount on every product in the store, and prioritizing making a bunch of extremely low integrity conversions that will ultimately hurt lifetime value and future cash flow…
You can instead overcome the objection of price with value

“but wait there’s more“

You are never going to win the lowest cost fight!

Globalization and conglomeration will allow larger competitive forces to push you out of the market if your only weapon in the fight to acquire revenue is to reduce your price

So instead, offer more value

This is every infomercial you’ve ever seen
And there’s a reason that infomercials drive billions of dollars every year

If you don’t want one product how about four for the price of three
If you don’t want one product at full price, what about 20% off an entire suite of products

Using discounts to raise lifetime value
by offering a lower price on a bundle
where that discount is still less than the acquisition cost of each additional sale required to sell the entire bundle piecemeal
is a wildly popular and profitable business venture

Focus on bundles not destroying your future

~ Charley T
Disrupter School