Discounts can be tempting to use as a tool to increase your sales volume.
There are plenty of cases where incentives have been successful; however, one caveat to consider is they also come with their own set of consequences.
When the dust settles and the results are in, every marketing team has to determine one thing:
Are discounted product offers always the optimal choice for a price point strategy?
That’s a question one large media company recently posed in their testing efforts that I wanted to share in today’s post to help you learn more about the potential impact of discounts on the bottom line.
Before we dive in any further, let’s look at the background on this experiment:
Background: A large media company offering various subscription products.
Goal: To determine the optimal pricing point after the introductory rate.
Research Question: Which price point will generate the greatest return?
Test Design: A/B split test
In the control, customers are presented with an offer of “50% off Home Delivery for 12 Weeks with free digital access.”
In the treatment, a triggered lightbox was added and designed to pop-up, offering an incentive for an additional four week discount of 50% if the order was not completed within a certain time frame.
The treatment saw a 4% drop in conversion rate that validated at a 94% statistical level of confidence.
What you need to know
Discounting can dramatically decrease the perceived value of an offer. Marketers definitely want to be careful not to damage the long-term value of an offer with gains earned via a short-term discount.
This is why I also refer to discounts as the hindsight incentive — their true impact is often assured only after the dust has settled and the damage to your brand is already done.
If you’re interested in learning more about incentives impact price, you can check out the newly released Web clinic, “Maximizing Subscription Revenue.”
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