The ongoing cost of living crisis has dried up consumer demand, leading to a global economic slowdown, according to the International Monetary Fund’s World Economic Outlook. This is clearly reflected in the slower growth of eCommerce retail sales compared to previous years.

In fact, according to Insider Intelligence, retail eCommerce sales growth was still 26.7% in the pandemic year 2020, while it has already dropped to 16.8% in 2021 and further to 7.1% in 2022. However, in 2023, retail eCommerce sales growth is expected to slightly rise again to 8.9%.

Despite this development, or perhaps because of it,the digital coupon market is set to cross US$ 29.7 billion by 2031. Retailers and online shops should utilize promotions and offers to boost sales, sustain profits, attract potential customers, and retain loyal ones – especially those with limited funds.

Why You Should Offer eCommerce Promotions

In times of macroeconomic shifts, e.g., during recessions, promotions allow retailers and online shops to adapt their marketing strategies. This flexibility helps maintain profitability and customer retention throughout all stages of the sales funnel. Brands and retailers can do so in various ways:

1. Raise the product’s base price to cover increased production or acquisition costs due to inflation.
2. Keep the average item price stable amidst inflation by adjusting the buying strategy, such as sourcing more from lower inflation categories.
3. Use promotions strategically to optimize discounts, stimulate sales, and manage inventory without significantly impacting profitability.

Key Benefits of eCommerce Promotions for Your Business

Serving as a tactical instrument, eCommerce promotions have a positive impact on four essential elements of your business.

  • Sales stimulation
  • Brand awareness
  • Customer acquisition
  • Customer retention

When used thoughtfully, eCommerce promotions serve as a versatile tool that helps businesses adapt to changing economic conditions, attract and retain customers, manage inventory, and boost overall profitability.

What Are the Different Types of Promotions in eCommerce?

eCommerce promotions benefit consumers and businesses. There are five types of promotions you can choose from: shop sales, category sales, vouchers, app sales, and engagement sales. Find out more about their characteristics in the graphic below.

As you can see, these five types of promotions can be divided into margin-optimized and flat discounts. In times of economic insecurity and a high need for profitability, we strongly recommend product-based discounts, like shop or category sales, over flat discounts, like the most commonly used vouchers.

Better Than Any Voucher: Margin-Optimized Promotions

Vouchers or coupon codes are very popular in eCommerce. Indeed, in the USA most adult consumers prefer promotional codes (67%), followed by ‘buy one, get one’ deals (58%), free-shipping coupons (54%), and rebate offers (40%) for savings from online retailers.

However, vouchers are not the best approach for running profitable promotions. The first reason is that consumers tend to redeem vouchers for items that are already bestsellers, leaving less desirable, “shelf-warming” items unsold. The second reason not to use vouchers is the risk of generating a negative contribution margin, which can severely impact the overall profitability of a business.

Using margin-optimized sales promotions instead allows shops to adjust the pricing of individual products using a smart discount logic. This is useful for dynamically managing stock levels, consumer demand, and profit margins.

Steer Profit and Inventory Balance With Tactical Promotional Campaigns

eCommerce promotions can stimulate sales and revenue by attracting new customers and promoting more sales. Their role, however, extends beyond just boosting profit margins. But what does a tactical campaign look like?

Tactical promotion campaigns often focus on slow-selling products that otherwise sell in smaller quantities, thereby occupying valuable storage space and increasing storage costs. By assigning a certain discount percentage to these slow sellers, the company can adequately cover the incurred costs and incentivize consumers to purchase these items.

Meanwhile, top-selling items, which would sell well regardless, receive no or only minimal discounts. Slow sellers are then cleverly added to the high-demand top sellers as cross-selling items. This strategy ensures that profit margins remain stable while effectively managing surplus stock.

The discount logic for such a tactical campaign should therefore take product margin, stock level, and sales data into consideration. In order to align with your company’s objectives, it’s crucial to monitor and account for the average discount applied across your entire product portfolio.

Implementing eCommerce Promotions: Create a Personalized Discount Strategy

Earlier, we introduced you to a few types of eCommerce promotions and recommended retailers consider product-based discounts, as these offer the best flexibility for reaching short-term goals.

However, the most effective promotion strategy involves tailoring discounts to individual consumers. This approach increases the likelihood of a sale while also promoting customer loyalty.

Segment Your Customers Based on Your Business Goals

Start by dividing your customer base into distinct groups based on factors like purchasing behavior, demographics, interests, and previous interactions with your brand. This allows you to tailor promotions to fit each group’s specific needs and preferences.

Select a Personalized Promotion Strategy

Explore which types of promotions are likely to succeed in attracting the desired customers. What are some components and strategies that you can use to personalize promotions?

  • Personalized offers
  • Loyalty programs
  • Dynamic pricing

Retailers can use the information they have collected about their customers to provide personalized discounts for products they are likely to purchase. Offers can also be sent to customers on special occasions or anniversaries, like birthdays.

Encourage repeat business by offering incentives through a loyalty program. This could include next purchase discounts (sent through order confirmation emails or gift cards added to the cart), or VIP discounts for your most valuable customers.

You may wish to implement a dynamic pricing model where prices adjust based on factors like demand, customer behavior, and inventory levels. This allows you to offer personalized prices or discounts to different customers.

Personalized Discounts: How to Increase Your Conversion Rate

When implementing your personalized promotion strategy, you also want to increase your conversion rates. There are two ways you can achieve this: through easy access to sale assortment or through effective promotion communication strategies.

Easy Access to Sale Assortment

This option involves creating a seamless path for customers to locate and browse through the discounted items. This can be achieved by setting up a distinct “sale” section on the website, or by using clear and eye-catching labels on product images to indicate that they’re part of a sale.

Effective Promotion Communication Strategies

Maximize the reach of your promotions by leveraging effective communication channels like email newsletters, social media, and website banners. This ensures your sales messages resonate with your customers, enhancing their shopping experience. Tactics such as displaying the original price with a strike-through next to the sale price, and using countdown timers for time-limited sales, can be part of this strategy.

Personalized eCommerce Promotions Can Boost Your Business

eCommerce promotions offer a multitude of benefits, from attracting new customers and increasing sales volume to fostering customer retention and loyalty.

We believe that as consumers demand more tailored shopping experiences, promotions – and especially personalized marketing strategies – will become even more important. With personalized discounts, existing profitability challenges can be addressed on a customer level.

While offering promotions can indeed boost immediate sales, the ultimate goal is to build lasting relationships with your customers, encouraging repeat business and enhancing overall profitability.