The mystery of discounting: 10% is a turning point, more than 15% to curb sales

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Everyone likes to discount, so sometimes the discount will be effective. Consumers feel they are saving money, businesses are stimulating sales and everyone is happy.

Need quantitative evidence? After the marketing tool coupon POPs, it only takes four months to stimulate 20% of all commercial customer sales. Businesses collect email addresses, fans and social-network trackers, and consumers pay more attention to the store and use their coupons to access the store's Web site 2.5 times times more than usual. In the process, sales also went up.

But we are not the focus today, the focus is on you. How do you optimize your discounts to consumers? We want to answer the most important questions. When it comes to coupons, you may want to ask yourself, where is the best discount point?

Does a high discount really lead to more sales?

A hypothetical rationale--consumers will certainly buy it--can derive this linear logic. You may feel that consumers love discounts, so the more discounts you get, the more you do.

The reality is a bit complicated. We want to thank Professor Dan Ariely and his work, through him, we now know that people are not always rational. The following comprehensive data analysis, can give us point to the exact point, at that point above the discount rate, there is no incentive to consume the effect.

Want to know how to optimize your discount measures to increase your sales? Of course you do. Let's start at the very beginning.

Background

Using the statistics from the coupon Pop tool, we counted the behavior of up to 10 million consumers within a one-month period to see how they reacted to different discount rates.

The following is the name of the country we are exploring:

Analysis

We grouped visitors and sales by percentage of discounts offered by the merchant. We then differentiate the sales of each group by the number of consumers that are brought in by each group's promotions. We removed the extremes at both ends, avoiding the data from the big merchants, and those who made 480,000 dollars a week through our tools would be able to cross the data from other small and medium sized businesses.

Our goal is to find out what the most effective discount percentage is, that is to say, how much of a percentage allows the visitor of the shopping site to translate into actual sales. To find out, we counted the number of sales per 1000 visitors.

The results we found were shocking, so we had to share it with you.

Discovery-the best discount point

The discount rate of 10% is obviously higher than the 5% discount rate. However, when the discount rate is higher than 10%, the ratio will actually drop! We had expected sales to rise in proportion to the increase in discounts, but the proportion of consumers converted to sales fell. In other words, the greater the discount, the lower the proportion of each visitor converted to consumption.

As the chart below shows clearly, a 10% discount is a turning point, and offering greater discounts will only lead to less sales.

And why? Professor Ariely may explain this because consumers will be less likely to value the product, when his discount ratio is greater, or if they realize that the profit margin is still very high if the retailer has such a big discount, so it's still not worth the price. Because there is no test for the reasons why these consumers make a choice, we can only speculate on the psychological factors behind this result. But we did take a comprehensive analysis to reach these points.

Because these results are surprising to us, we have been very skeptical. We want to make sure that there are no invalid data in our research, so we put it in tabular software Excel, hoping to check the ideal discount rate based on specific product pricing. The conclusions are as follows:

Product value of 100 U.S. dollars and below, 10% is indeed the best discount point;

Between 101-200 dollars in the product, the best discount point is around 15%, but there will not be more;

More than 201 dollars of products, the best discount point actually moved down. Businesses only need to set a 5% discount rate. Even 10% is not the best!

So, you need to check the price area of your product further, and then do this test the next time you make your own promotion. We would like to hear your own test results, you can share your comments below. (translation: Dio)