7 Discount Pricing Strategies to Drive Customer Acquisition, Sales, and Profitability

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If this were a scene from a movie starring your business venture, you would want to watch it over and over again.

Customers see your eye-catching Facebook ad for an exciting new subscription service. They are enticed. Clicking through to your Facebook page, they are further excited to find out they can instantly get a $100 discount when they subscribe as a new customer, but only for a limited time.

The next thing you know, 500 new customers have signed up. You now have guaranteed recurring sales on subscription fees, and potential additional sales revenue from existing and future offerings.

You feel great knowing that somewhere out there, 500 satisfied customers will be using your product over the next few months, while your sales revenues climb.

Who can resist a bargain?

Black Friday customers have historically taken advantage of early bird promotions at giant retail stores like Walmart or Best Buy, so you know that getting discounts is a major consumer motivator. Customers will even camp out overnight, making sure they’re able to take advantage of the stores’ exclusive deals—particularly on expensive electronic items.

According to Adobe Analytics, retailers earned a total of $6.22 billion in sales during last year’s Black Friday. As for Cyber Monday, Black Friday’s modern, e-commerce equivalent, TechCrunch reported a monstrous $7.9 billion in sales. An impressive $2.2 billion of those sales came from smartphone purchases—boding well for app-based services looking to capitalize on holiday shopping.

Customers love promotional and discounted pricing

Discounts are big factors in determining why customers go out of their way to buy products or subscribe to offers on an on-going basis from businesses. Discounts draw new customers to businesses and encourage them to try out products, driving sales and profitability in the process.

Businesses have increasingly taken advantage of the potential to grow revenues by running discount promotions.

According to RetailMeNot’s Retail Marketing Trends Report for 2018, 51% of retailers in the United States opted to provide offers/discounts for consumers using mobile apps in 2018 “to positively affect sales growth.” This suggests that consumers are increasingly using the closest shopping center available to them: their phone.

Are discounts a good strategy for subscription businesses?

Not all discount strategies are equal. How each will impact a SaaS (Service as a Software) or subscription-based business in terms of sales growth and customer acquisition will vary.

There are various ways to price discounts. In a recent post, we examined how volume or tiered pricing can significantly impact the output of your pricing model.

A good pricing model paired with effective discounts can maximize growth. Here are seven strategies to consider when utilizing discounts as a tool to increase profits and grow your customer base.

1. Offer attractive discounts to new customers

Acquiring new customers is difficult unless you have a compelling strategy that commands attention. One way to attract customer interest is to offer incentives in the form of discounts or promotions.

For new customers signing up, try offering a discount percentage or a free trial period. This allows customers to sample your product at low or no risk. If possible, pair new customer discounts with a money-back satisfaction guarantee.

The money-back guarantee and free trial work best to give customers a great first impression. You have to be sure that customers want more at the end of this initial sampling. Otherwise, the tactic can negatively impact sales targets when customers opt out of subscribing after enjoying a discounted or free product.

To maximize success, once customers have completed the trial period and made their commitment, entice them further. There are several ways to do this, such as providing:  

  • additional products with superior features to choose from
  • an exceptional user experience within your website or app interface
  • a reliable payment process
  • excellent customer service

If you employ these strategies to complement a quality product, you’ll be sure to keep users coming back for more.

Spotify, hailed as one of the most successful subscription-based businesses in the industry, uses this strategy by allowing first-time customers to subscribe for  a month free on Spotify premiumOnce users have enjoyed personalized, commercial-free playlists on the platform, the desire to stick around is practically a given.

2. Put expiration dates or limits on discounts

Discounts encourage consumers to sign up and commit to subscriptions; deadlines push them to do it quickly. Putting expiration dates or limitations on promotions creates a sense of urgency consumers can rarely resist.

Think of subscription businesses who tell customers that the 50% discount on their enrollment fee will expire by midnight and their once-in-a-lifetime discount may not be offered again. Ever.

It is difficult to ignore compelling CTAs, or calls to action, such as:

  • This Exclusive Offer Expires by Midnight
  • Redeem NOW
  • Get it NOW before it’s GONE
  • CLAIM it while it’s HOT

They’ll also say the offer is good only for the FIRST 1,000 subscribers or that your products are LIMITED IN QUANTITY, -ALMOST OUT OF STOCK, or WILL BE DISCONTINUED.

While some of these specific examples may be a bit over the top, scarcity is a persuasive strategy that works to create a sense of urgency among consumers, especially in e-commerce sales.  

3. Give competitive discounts or partner with popular brands

Most abandoned shopping carts and coupons occur when customers surf the web or receive word-of-mouth recommendations for better subscription offers.

Before creating an offer, make sure discounts are competitive. If not, you run the risk of being ignored by potential customers who have done their research.

If you can’t offer a competitive discount, try running a discount promotion with irresistible, limited-time incentives like seasonal or exclusive products your customers are anxious to own.

For example, a SaaS company could package some of its high performing online tools with discount promos to further entice potential customers.

Collaborate with a popular brand when bundling promotions. Giant telecom brands now use this strategy for their customers. T-Mobile offers free Netflix to its eligible subscribers while Sprint and AT&T add value to their new promos with Hulu and HBO, respectively.

7 Killer Pricing Strategies for Subscription Businesses
7 Killer Pricing Strategies for Your Subscription Businesses.

Use strategic pricing as a key marketing tool. Tailor pricing plans to meet the needs of your customers. Learn 7 pricing strategies that can help you grow your customer base, and maintain it!

Free Download

4. Get rid of inventory by offering overstocked, outdated or discontinued products as freebies

If your inventory includes products that are about to expire or will be discontinued in production, include them in upcoming marketing efforts. Offering aging inventory as free gifts to new subscribers kills two birds with one stone.

One, you ease your inventory levels with products that are already being phased out. Two, a strong relationship is built by providing new customers with useful, free gifts. Tempt new subscribers by offering a free set of gifts upon signup, and your overstock helps leverage sales.

5. Offer products that consumers can’t afford during the regular retail season

Some consumers wait for sales events on products that have relatively high price tags.

For example, Amazon’s Prime Day in July is a hyped-up day of deep discounts for certain products. Not only does Amazon offer substantial savings on many of their popular products such as their Kindles and Echoes, but other retailers that sell through Amazon can capitalize on this day. In 2018, Amazon’s Prime Day was predicted to gross $3.4B, with third-party sellers moving $1B in their own inventory.

If your business offers training courses to members and the average price tag per course is high, identify and offer your popular courses to new subscribers for a limited time discount. Udemy ran this type of promotion for Valentine’s Day in 2019:

udemy discount strategy

Tell potential subscribers, of course, that discounted offers are only available to new members for a limited time. Once they’ve opted in, stress additional benefits, including guaranteed discounts in future offerings. Solidify the relationship by reiterating that non-members pay the full price for the same products.

6. Reward loyal members

This strategy is a relationship-building marketing tactic that can strongly influence potential subscribers to sign up.

By offering reward or loyalty programs in the form of discounts, new subscribers may join knowing they will enjoy more benefits when they commit for a longer period.

Let’s say you offer a free set of gifts or a discount to new customers upon sign up. Entice them to further take advantage of an offer by promising them another set of gifts or discounts on their first month anniversary as a subscriber. Offer better discounts and more free gifts once they’ve extended their subscription for a longer period.

Sprint recently sent out emails to long-term customers not only offering a free iPad 6, but offering savings on a data plan for the iPad, as well. This doubling-down can maximize both sales and keeping acquired customers at the same time.

sprint reward loyalty discount strategy

Note the scarcity tactic Sprint uses here: The offer ends 3/7/19!

Offering loyalty benefits will confirm with newly-acquired subscribers that they’ve made the right choice. They will often respond positively by upgrading their subscription for a longer commitment, which translates to more revenue.

7. Convert abandoned cart losses into new sales opportunities 

Frequently updated findings by Baymard Institute reveal a 50%-76% range of average abandonment rate in e-commerce shopping.

Research and identify the products your customers abandon before reaching checkout and offer discounts on those items for a very limited time.

Give customers a gentle follow-up through emails, reminding them that they have products in their carts and can get a discount if they want to buy them.

However, it may not be wise to make this a recurring practice for existing customers. Constant discounts can create expectations resulting in a dangerous revenue deficit.

Using discounts to drive customer acquisition, sales and profitability is a strategy that works, especially for SaaS and subscription-based businesses that require a continued commitment from customers who need an extra push to sign up.

The success of your discounting efforts can be a difficult variable to track manually, but an automated subscription billing platform can help simplify the process for your business. A robust subscription management and billing platform provides the capability to easily deploy discounting and coupon-ing along with real-time insights into activation cohorts and monthly recurring revenue impacts

If done right, with appropriate strategy and technology enablers, discounting can prove to be a very profitable strategy to boost sales and membership growth.

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Tags: SaaS Strategy Pricing

Fusebill Inc.

Fusebill simplifies subscription and billing management by automating many manual accounting and financial processes and workflows. Our cloud-based platform gives companies the freedom to grow their businesses, the flexibility to capitalize on new product opportunities, and the agility to maintain a competitive edge.

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