How offering discounts can be used as a marketing strategy

Running a business is not all about making sales and generating revenue. It is a complex process that requires strategic planning to achieve long-term success. One factor that can contribute to the success of a business is offering discounts. Discounts can be valuable marketing strategies that can help businesses attract new customers and create loyalty among existing ones. In this article, we'll explain how offering discounts can be used as a marketing strategy and what business owners and entrepreneurs can do to use them effectively. Here’s everything you need to know about using discounts as a dynamic marketing strategy to boost business success.

Why discounts matter in marketing

Discounts go beyond merely offering a price reduction. They send a message. They demonstrate value, encourage purchases, and create a sense of excitement that drives behavioral shifts. Wondering how? Here are the key ways discounts can be used in your marketing efforts.

1. Attract new customers 

New customers are often hesitant to spend on a brand they're unfamiliar with—it’s one of the biggest barriers to conversion. A discount, however, can dissolve that hesitation in an instant. Offering an enticing “first-time customer discount” or a limited-time deal serves as a low-risk incentive to encourage potential buyers to take a leap of faith.

Once buyers have experienced the quality of your product or service at a reduced price, they’re more likely to return even without future discounts. Your mission? Offer value strong enough to make a loyal customer after the first try.

2. Increase sales volume instantly 

Need a quick boost to your cash flow? Discounts are the ultimate motivator for purchase behavior. They encourage customers to buy more and sooner than they might have originally planned.

Take "Buy-One-Get-One-Free" offers, for instance. They often lead customers to purchase extra items, doubling transaction amounts and clearing shelf space—an instant win for businesses looking for higher sales volumes.

3. Clear out old inventory 

Ever wondered how to price seasonal stock that just isn’t selling? A discount strategy is your answer. Discounts are an excellent tool for clearing out outdated inventory while generating cash flow for new product launches.

The extra bonus? Freeing up physical or virtual shelf space for new arrivals helps present a fresher, more appealing store or website to your customers. It’s efficiency, revenue, and visual appeal, rolled into one.

4. Generate brand recognition 

Discounts don’t just drive sales—they elevate your brand’s visibility. Well-executed promotions can amplify your reach and create buzz about your business. Think of coupons, discount codes, and flash sales that carry your branding.

Platforms like email newsletters or social media channels amplify the effect, giving customers more opportunities to interact with your business. Every coupon your customer shares with a friend, every sale campaign that goes viral, sparks new interest in your brand.

5. Build customer loyalty 

Discounts shine not only as acquisition tools but also as loyalty builders. Promotions custom-designed for repeat customers, like exclusive loyalty discounts or referral offers, nurture valuable relationships with existing clients.

For example, offering a discount in exchange for positive reviews or social media shares can strengthen brand advocacy. Customers feel valued and, the next time they shop, they're more likely to choose your brand over competitors.

The Pros and Cons of pricing with discounts

Discounting, much like any pricing strategy, is not without its tradeoffs. Here’s an overview of the key advantages and potential pitfalls businesses should consider.

Pros

• Encourages quick conversions 

Discounts reduce the psychological barrier to spending, making it easier for potential customers to say “yes.”

• Clears unwanted inventory 

Timing a sale right can help you empty stockrooms quickly while still generating value from unsold stock.

• Boosts brand engagement 

Campaigns with attractive discounts capture attention and increase customer interactions.

• Enhances customer perception of value 

A carefully applied discount can double as a way to demonstrate generosity without permanently reducing prices.

Cons

• Risk of devaluing products or services 

Excessive or poorly timed discounting can create an expectation that lowers perceived product value.

• Potential profitability loss 

Lower prices mean tighter margins. Businesses must ensure that discount pricing doesn’t undermine overall financial health.

• Short-term focus 

Depending solely on discounts can hinder the growth of more sustainable sales strategies like value-adds or brand loyalty programs.

Profitability vs. Revenue

When deploying a discount strategy, understanding the balance between profitability and revenue is crucial. Discounts, while effective at driving immediate sales, can reduce per-unit profit margins.

For example, a 20% discount means you’ll need to sell significantly more units to achieve the same overall profit level. However, discounts can lead to ancillary gains, such as increased brand exposure and follow-on purchases at full price. The secret? Evaluate your breakeven point carefully and ensure your discounts make sense for both short- and long-term goals.

Balancing profitability with revenue generation requires detailed planning. Discounts must align with your broader pricing strategy and competitive positioning for maximum impact.

How to price discounts strategically

If making your discounts work for you is the goal, the key lies in thoughtful execution. Below are some guidelines to develop an effective discount strategy.

1. Define clear objectives

What do you want to achieve with your discount? Whether it’s clearing inventory, driving traffic during slow periods, or building email subscribers, having clear goals helps drive success.

2. Use data to inform strategy

Analyze your sales data, customer demographics, and industry trends to identify when and where discounts will have the greatest impact.

3. Time your promotions wisely

Seasonal and holiday sales are proven drivers of customer engagement. Use milestones—such as Black Friday or end-of-season—to justify discounted prices.

4. Keep it limited-time

Scarcity is a powerful driver of customer behavior. Creating a sense of urgency, through flash sales or “weekend-only” offers, can skyrocket engagement.

5. Focus on experiences, not just discounts

Tie your discounts to value-driven experiences. For example, bundle items together at a reduced price or offer discounts during curated in-store events.

Using discounts to drive long-term success

Discounting, when done right, serves as more than just a sales booster—it becomes a strategic advantage. By leveraging discounts smartly, you can attract new customers, optimize revenue, and build a loyal community of followers.

Want to master discounting as part of a broader pricing strategy? Check out our exclusive online courses on effective pricing and discounting strategies. Learn how to price your products strategically, retain optimal profit margins, and drive long-term customer satisfaction.

Remember, discounts are a powerful tool, but only in the hands of those who know how to use them.