Direct-to-consumer brands have defined modern retail best practices, from up-to-the-minute digital marketing strategies to sustainable retail. Today, there’s a new emerging trend retail brands are embracing: the no-discount strategy.
Ahead, learn the pros and cons of running a no-discounting strategies and the top nine options to implement.
What is the no-discount strategy?
A no-discount strategy means that a brand never (or extremely rarely) offers discounts on its products. There are shades of gray to this approach: some brands may run a no-discount strategy 99% of the time but still offer a small Black Friday promotion or rewards to their loyal customers in the form of store credits.
The overarching idea, however, is that the brand takes a firm stance on its pricing. Its product is worth its standard price point.
Many brands, like Everlane, even market their price point as the cheapest fair pricing on the market. Everlane goes so far as to give shoppers a breakdown of all costs related to an item, such as how much it pays its factory workers, how much it pays in shipping, etc.
The result of this approach is that brands can create more loyal customers who feel like they’re buying a well-made item at a fair price. Perhaps more importantly: Customers pay full price because an item costs what it costs, and they trust the brand to set a reasonable price point from the start.
Why do some retailers never discount?
For many years, discounting was the go-to strategy for retailers, particularly as they battled Amazon’s plunging prices. Retailers like Kohl’s and JCPenney became known for never-ending promotions.
However, this strategy led to more than a few issues for retailers, such as:
It trains shoppers to not buy at full price
When consumers know an item will eventually go on sale, they feel no urgency to buy it right away. Instead, they begin to think, “If it’s not on sale today, it will be tomorrow. I’ll just wait until then to buy.”
The ubiquity of discounting strategies also caused online shopping behavior shifts, like a rise in customers attempting to game the coupon system. For instance, it’s pretty common now for shoppers to abandon their online shopping carts to see if they can trigger a cart abandonment discount via email in a day or so.
JCPenney learned how detrimental its discounting training was and decided to ditch it in favor of steady “everyday low pricing.” The retailer lost many customers who saw the increased ticket prices as a new “high bar” for JCPenney to undercut with discounting.
In the first quarter post-implementation of the new pricing strategy, JCPenney lost $163 million, filed for bankruptcy, and moved back to its regular discounting strategy.
It cheapens the product by putting the focus on price
Customers are equally concerned with product durability and quality as price. In fact, for a product customers deem good quality, they reportedly were willing to pay an equitable price, whatever that may be.
This is the reason brands like Everlane and Thursday Boot Co. can sell at full price: they’re putting the focus on the quality of their products rather than the price. Companies that cultivate strong loyalty around their products and brand can confidently maintain their pricing, benefiting both the brand and its customers. This customer loyalty is built on a deeper connection to the brand, ensuring customers feel valued and are more willing to invest in quality products.
On the other hand, discounts inherently make price a major focal point, putting the product’s benefits on the back burner. This is detrimental, as The Economist reports that consumers think a discounted item does not function as well as a full-priced item.
It attracts bargain shoppers
Offering discounts can attract a new customer to your business, but it might not be the long-term, loyal customer of your dreams. Bargain hunters are often brand agnostic and unlikely to convert into loyal shoppers. As lifetime value (LTV) increasingly becomes the metric that drives success, single-time shoppers are usually not worth the money spent to acquire them.
Thursday Boot Co., for example, doesn’t discount. It develops long-term relationships with its customers based on product quality, not incentives.
“This is the right way to treat people, and it also happens to be best for the business long term,” says Thursday’s cofounder, Connor Wilson. Instead of discounts and promotions, Wilson shared that the brand focuses on providing high-quality, hand-crafted footwear with honest pricing.
It cuts into profit margins
Perhaps the most obvious disadvantage to discounting is that it eats away at a business’s profit margins. The discount comes out of product margin, after all. If an item that sells for $30 with a profit margin of $10 is discounted by 30%, the result is only $1 of profit.
You can use the break even point formula to determine if your discounts are actually hurting your bottom line.
It’s not sustainable
Constant discounting is not sustainable for a brand or the earth. When brands with items that start at low price points lean into discounting as a marketing ploy, they must cut corners when producing their items to compensate.
For example, they might:
- Use lower-quality materials
- Outsource production to factories with poor labor conditions
- Skimp on quality control measures
These compromises affect product quality and contradict the principles of sustainability that many consumers now prioritize.
Advantages to discounting
Discounting didn’t become so ubiquitous for no reason. There are some advantages to running promotions and other off-price strategies, which is why we see them used so frequently.
It increases short-term sales
Discounts are a quick way to spike sales in the short-term: a store with an active discount of some form is eight times more likely to make a sale. Plus, time-limited discounts and scarcity-focused deals create a sense of urgency that nudges shoppers to snap up items.
It can increase exposure to new customers (and convert them)
Discounts are particularly effective for converting new customers, as they lower the barrier to entry. This is particularly true in the world of ecommerce, where customers don’t get to physically handle products before buying them.
It can increase AOV
Discounts aimed at increasing order volume, like buy one, get one (BOGO) or buy more, save more, are incredibly effective at driving higher average order values (AOV). BOGO sales are the most popular type of discount. Other retailers use a bundling approach paired with discounts to encourage larger order sizes, too.
It can help move merchandise
Discounts can help move products quickly, which is why retailers with stagnant or slow-moving merchandise often use them to liquidate dead stock and make room for new items.
It can reward loyal customers
Rewarding your loyal customers is a simple way to keep them around, and offering exclusive discounts to your VIPs is an easy way to do this. When you pair this strategy with the fact that return customers spend three times more than one-time shoppers, it’s an easy way to increase customer lifetime valueand say thanks to your avid fans.
9 non-discount strategies to earn sales
1. Product bundling
Product bundling is an excellent sales tactic that boosts revenue without slashing prices.
You group related items together and sell them as a bundle An electronics retailer, for example, might package a laptop with a mouse and carry case. The bundle’s price is lower than the total cost, but it’s not a direct discount and it helps create a sense of increased value for customers
The retailer might make a $210 profit on an $880 laptop bundle instead of $250 on the separate items. But, they might sell 20% more units overall, resulting in higher total profit and improved inventory turnover. By grouping these complementary items together, retailers can drive sales without resorting directly to discounts.
💡 Create omnichannel bundles and multipacks from your Shopify admin with the free Shopify Bundles app.
2. Loyalty programs
Loyalty programs are a smart way to keep customers coming back without lowering prices. These programs give special rewards and offers to frequent customers instead of discounts.
A bookstore’s loyalty program might work like this: For every $50 spent, customers earn a $5 store credit. It feels more valuable than a simple discount, and it’s smarter financially for the store because it keeps the revenue within the store,
If the store gave a 10% discount on every purchase, a $50 book would sell for $5, cutting 5% of the store’s revenue. However, with the loyalty program, the customer pays the full price and earns a $5 credit later. This credit costs less for the store to fulfill. Plus, to use the credit, the customer ends up buying another book, which leads to additional sales.
To create a loyalty program in Shopify, you can use a loyalty app that integrates with your store. Yotpo Loyalty & Rewards and Smile are two options with free plans available that can be accessed online and in-store.
3. Limited-time offers
A limited-time offer taps into people’s fear of missing out, pushing them to buy quickly. Rather than discounting, it creates urgency by offering products for a short time only.
Customers who want these items must act fast, often paying full price or more. It works by adding value instead of lowering costs, making customers feel they’re getting a good deal, even at regular prices.
💡 Use Shopify Launchpad to run successful limited-time offer campaigns. Coordinate the timing of your offer, automate the product release, and manage inventory from your admin.
4. Personalized recommendations
Use customer data to suggest products that match their interests and past purchases. By showing people items they’re likely to love, you can increase sales while keeping prices steady.
As a retailer, you can collect data through your ecommerce website, POS system, or social media accounts. For example, with Shop Pay, you can capture a shopper’s email at checkout and match their payment information to their customer profile. This lets you provide more effective personalization and a faster checkout experience.
If you want to collect specific information, like birthdays or loyalty program status, you can create custom fields attached to each customer profile.
5. Free shipping thresholds
Set a minimum purchase amount that customers need to reach for free shipping. This nudges shoppers to add more to their cart and hit that magic number.
Think about it: If your store offers free shipping on orders of $50 or more, and a customer has $45 worth of products in their cart, they’ll likely toss in one more item to snag that perk.
Free shipping thresholds work by covering shipping costs on bigger orders, which usually have enough profit built in to handle this expense. When shoppers add extra items to hit the threshold, the boost in sales and larger order sizes typically makes up for the shipping costs, and then some.
Adding free shipping thresholds in the Shopify admin is simple:
- Navigate to Settings, then Shipping and delivery.
- In the Shipping section, click on the shipping profile you want to edit.
- For each shipping zone, click “Add rate.” Enter a name for the rate and set the Price field to 0.
- Click “Add conditions” and select “Based on order price.” Enter the minimum price for the free shipping threshold.
6. Free gift with purchase
Offer a freebie when customers spend a certain amount or buy a specific product. This is a nice alternative to discounting because it makes shoppers feel like they’re getting more value for their money.
Picture a skin care brand throwing in sample-size moisturizers when customers buy their face wash. This would introduce them to new products they might like and buy later. The main product would keep its original price tag, and customers would walk away happy knowing they’ve got free stuff in their bags.
By offering a free gift with purchase using Shopify Scripts, Tropeaka boosted its average order value by AU$5, from AU$89 to AU$94. This simple tactic, applied to their roughly 15,000 monthly orders, led to a substantial increase in the company’s revenue.
📚 Learn how Tropeaka sold $1 million in three days.
7. Personal shopping services
Another alternative to discounting is offering personal shopping services. This approach shifts the focus from price competition to value-added experiences, helping customers find the perfect items.
For example, Diane von Furstenberg (DVF), a famous fashion brand, uses this strategy in its flagship store. Its retail staff are called “personal stylists,” and they offer customized services to all shoppers.
These stylists use technology to access detailed customer profiles, including past purchases and preferences. This allows them to provide highly personalized recommendations and create a luxury shopping experience.
By using tools like Shopify POS and specialized apps, DVF’s staff can easily view a customer’s online and in-store purchase history as well as metadata like their birthday and shopping preferences. Shoppers are often willing to pay regular prices or even a premium for this personalized help and expert advice.
📚 Read more about Diane Von Furstenberg’s story
8. Upselling and cross-selling
Upselling encourages customers to buy a more expensive version of the product they’re considering. For example, a clothing store employee might suggest a higher-quality jacket made from premium materials instead of a basic model.
Cross-selling involves offering related products that complement the customer’s initial purchase. Think of a bookstore employee recommending a reading light or bookmark when a customer buys a novel.
In both scenarios, the store increases its sales without offering discounts. The focus is on providing more value to the customer and offering products or upgrades that genuinely benefit them.
📚 Learn: The Art of Retail Upselling: How to Get Your Customers to Buy More
9. Build an email list
An email list lets you talk directly to people interested in your products. You can use emails to show the value of what you offer. Maybe you’ll share helpful tips, behind-the-scenes looks at your business, or stories from happy customers.
By sending regular, relevant, and engaging emails, you keep your brand in customers’ minds. When they’re ready to buy, they’ll think of you first—no discount needed. You can also use emails to highlight new products or special features, giving people reasons to buy that don’t involve lower prices.
With the Shopify Email app, you can build sales-focused emails in minutes from your Shopify admin. Use email templates for products, sales, restock, holidays, events, and more.
How to decide on a discount pricing strategy
Ultimately, every brand needs to decide what sort of discounting strategy is right for their products and audiences and whether they want to use them at all.
Keep in mind that even brands with a strict no-discount policy may still employ alternative pricing strategies. These creative approaches can help move products and drive sales without explicitly offering discounts.
Here are the steps to take when considering a discounting strategy.
Step 1: Determine your goals
As with any strategy, it’s important to establish (and document) your objectives before getting too far into execution. Having clear end goals in mind helps determine whether discounting is the best way to reach your targets.
For example, if the goal is to boost AOV, try creating product bundles before running official discounts. With product bundles, you don’t necessarily have to provide any sort of discount on the products to achieve that goal—the convenience factor is sometimes enough to drive more sales.
The transparency around the fact that the brand is working to move stagnant products helps set expectations for their other collections and service a more bargain-oriented secondary buyer persona.
Step 2: Understand your audience
Next, think about the nature of your current audience. For example, if a discount targets first-time customers, will it bring in the kind of audience you plan to serve for years, or is it bringing in one-time bargain hunters?
You may also find that part of your customer base works in lower-paying fields or high-stress roles. Offering an exclusive discount for shoppers working in professions like education and healthcare shows appreciation and can help generate long-term loyalty with customers in specific demographics.
Step 3: Test your theories
With so many types of discounts and so many ways to offer them, it’s best to test different tactics to find out what works best with a data-driven approach. Give each deal you run a unique coupon code to track the sale’s upfront success, then follow the LTV of customers who utilized the promotion as they continue their customer journey.
Tracking the success of your promotions is exceptionally easy with Shopify POS Pro’s robust reporting. Shopify POS Pro supports any discounting strategy you choose to test, and its reporting features make determining the success of specific discounts simple.
Decide if the no-discount approach is right for you
Ultimately, your ideal discounting strategy likely exists somewhere between no discounts and a never-ending deluge of deals.
Remember: Discounts aren’t the only way to win market share. Shoppers are looking for great products made by passionate brands.
When brands effectively communicate the value of their products at full price to the right audience, many consumers are willing to pay it. Over time, this approach can strengthen customer loyalty and affinity for the brand.
No matter what type of discounting strategy you choose, Shopify POS Pro offers powerful tools to implement it effectively. From customizable discount rules to detailed analytics, Shopify POS Pro helps you execute and track your pricing strategies with precision.
Read more
- How to Make Your Product Copy More Persuasive
- Shopping Tourism: Why Retailers Should Care (+ Tactics to Leverage this Trend)
- What Retailers Can Learn From The Museum Of Ice Cream’s Sweet Success
- What is Visual Search: How Retailers Can Use it to Enhance the Customer Experience
- How to Grow Your Retail Business with Brand Licensing
- The Ultimate Guide to Digital Signage for Retailers
- 7+ Essential Snapchat Strategies the Retail Pros Use
- 5 Lessons Traditional Retailers Can Learn From DTC Brands
- The Ultimate Guide to Geotargeting in Retail
No discounting strategy FAQ
Why should you not offer discounts?
There are a few reasons why you should not offer discounts. The first is that it can devalue your product or service. Offering discounts can give customers the impression that your product or service is not worth the full price. Additionally, discounts can create a race to the bottom in terms of pricing, as competitors may try to match or beat your discounted prices. Finally, offering discounts can attract customers who are looking for a bargain, but may not be the most loyal or profitable customers in the long run.
How do you sell without discounting?
- Offer free shipping thresholds
- Create bundles
- Target the right audience
- Promote the value
- Highlight unique features
- Host events
- Focus on customer service
What is a discounting strategy?
Discounting is a pricing strategy in which a seller reduces the original price of a product or service in order to increase sales. When used strategically, it can be an effective way to attract customers, clear out inventory, and stimulate demand. Discounting strategies can include time-sensitive promotional offers, bulk discounts, tiered pricing, and customer loyalty rewards.
Is giving discounts a marketing strategy?
Yes, giving discounts can be a marketing strategy. It can be used to draw in new customers or encourage existing customers to purchase more often. Discounts can also be used to reward loyal customers or to promote a new product or service.
