Discounting Using % vs. $

Industry Insights
Fondue Team
March 10, 2023

As the discounts space continues to evolve for  e-commerce brands, two facts have become abundantly clear: 

  1. Discounting strategies are still developing — making them quite nuanced to navigate correctly.
  2. The way brands choose to approach discounting has a huge impact on their bottom line, whether they’re aware of it or not.

Because of this, there aren’t many brands that currently have a truly data-driven discounting strategy yet. And many don’t even know where to start (don’t worry, we can fix that). First things first — your two main options are percentage-based or dollar-based offers. Each method has its benefits and drawbacks, so the choice of which discount to utilize ultimately depends on your brand's goals and the preferences of your target audience. 

When offering discounts, using percentages can be a double-edged sword. And the edge is…sharp. (Go figure) On one hand, they provide greater savings while keeping the brand's profits intact — which is why it's a favorite among e-commerce brands. Plus, customers tend to see a percentage discount as a more generous offer, so it's more likely to motivate them to make a purchase. Obviously, there are also downsides to using percentage discounts. (Why else would there be more than one option?) 

They can tend to confuse customers who may not be able to calculate the exact amount they're saving. Naturally, this can lead to misunderstandings and customers feeling like they're not getting quite as good of a deal as they initially thought. So, while percentage discounts can be a great way to boost sales, they still require some careful consideration and application.

Now, think of dollar-based discounts as the Ron Swanson of sales strategies - they're straightforward and no-nonsense. Customers love them because they're easy to understand and leave little room for interpretation. This makes them especially effective for high-ticket items, where a $100 discount can seem like a total steal. But don't get too caught up in the dollar signs - offering too big of a discount can seriously hurt your profits, especially for e-commerce brands. (You gotta pay to play, after all) And if the item is already priced low enough, customers may not be as enticed by the offer. So while dollar-based discounts can be great for boosting sales, it's important to consider and balance their impact with your bottom line.

As we learned earlier, effective discounting ultimately comes down to personal preference. It's important for e-commerce brands to understand the benefits and drawbacks of both options and carefully consider their goals and target audiences before making a decision. Whether it's the allure of big savings or the simplicity of a straightforward discount — a well-planned discount strategy is a perfect way to entice customers to purchase instead of shop.