Discount - Effective promotional tool

Discount - Effective promotional tool

Discounting - 8th wonder of the World


91% customers tend to revisit the store, when offered a coupon or discount.

Discounting is not so new concept in the business world, they have been used since 

a long time as a promotional tool but with time discounting game has completely 

changed and it has now become a weapon for businesses to fight the competition.


Essentially after digital revolution i.e. use of discounts by Online Giants and Chain 

Stores has resulted in unprecedented importance of discounting for every possible 

product. Discount not only makes customers feel good about product but also create 

value, emotional bond and loyalty for business in customer’s mind.


What is Discounting ?


It is a promotional tool used for years for acquiring and retaining customers. For 

discounting, the product is sold at lower than it’s actual price.

It gives satisfaction of buying the same product at cheaper price, making customer 

feel good about scoring a good deal and that the penny saved is penny earned, 

ultimately improving their purchase experience.

It also creates certain sense of excitement and urgency to make purchase before the 

discount ends, driving more customers, more purchases and customer’s loyalty.


Types of Discount


1. Percentage Sales -


Percentage sale discount is a discounting system in which the discount is based on 

the cost and margin available and that is expressed in term of percentage on mrp of 

the product, e.g A business may offer 15% discount to its loyal customers or certain 

percentage discount when customer buys two or more items.


Effectiveness of these discounts depends on perception of customers , customer’s 

value percentage discount more than flat discounts e.g. when they see getting 60% 

discount on food delivery they value it more compared to when they see flat Rs. 

100/- off on the orders.


This discount is easiest to calculate, as just a calculation of margin between cost 

and mrp needs to be calculated and certain percentage is to be decided after 

keeping the margins for profit aside. And due to this convenience it is popular in both 

B2C and B2B.


2. Buy One , Get One -


Popularly known as BOGO, this discount emphasises on buying two products of 

same item or item of equal or lesser value. It encourages sales as who does not like 

to get things for free .


This tools works best in retails and e-commerce settings as it is appealing much 

though in e-commerce setting , customer still needs to pay shipping charge for both 

the products.Major benefits of this discounting is stock clearance and increased 

order size per customer. Customer’s also value such discounts as they get two 

products at the price of one.


3. Over-Inventory Discount or Stock Clearance Discount


Sometimes business acquires goods more than needed and this results on 

dead-stock or shelved inventory. This inventory has got the investment but returns 

are no yet monetised and hence resulting in overhead costs and losses and to dilute 

this loss, over-inventory discount is used. It refers to selling the access inventory at 

lower than actual price. While it may not entirely result in profits but surely dilutes 

the loss.


4. Free Shipping


Essentially used in ecommerce setup, this discount is used to encourage customers 

to make online purchases using the free shipping as an appeal to purchase. Usually 

stores or websites put up a certain amount as basics and over that bill amount 

shipping is free, making customers to make minimum purchase of the certain limit 


E.g. - One can offer free shipping only on orders above Rs.500/-, resulting that most 

customers will make a minimum purchase of Rs.500/- .


It also adds as a competitive advantage as when a customer finds same products at 

two stores, he is obviously going to purchase where he gets no or lower shipping 



5. Cash Discount


It refers to discount given on cash payments or maybe early payment discount 

(before the due date of credit). It encourages buyers to make payment immediately 

or within a specific period of time. It makes customers make payment without any 

miss as they get incentive for making payment within due time.


Example – Discount is offered in this manner, 10% off when immediate cash 

payment is done, 5% off is payment is done within a week, 3% off if payment is 

made within 15 days and no discount if payment is made after 15 days.


6. Wholesale discount


This kind of discount is usually offered by wholesalers or suppliers when the buyer or 

retailer makes the bulk purchase. The basis of calculation of such discounts is 

usually the order bracket. For Example – 10% off when order size is 10,000 pcs, 5% 

off when the order size is 8000 pcs .


Some chain departmental stores use this tool for direct customers as well, when the 

purchase is in bulk or as a part of loyalty or subscription program.


7. Referral Discounts -


It is one of the rapid growing trend in discounting industry, due to rapid growth of 

influential marketing.

This tool offers discount to customers each time they refer the product to a new 

customer, creating a chain of value for business as well as customer.

In this the influencer or existing customer get their own unique referral code, which if 

a new customers uses while buying, both of them or either of them gets the 

discount. .


This can be helpful for generating organic traffic as the tool uses Word-of-mouth 

marketing backed by a discounting tool, making it one of a kind.


8. Price Bundling -


Initially it was popular only among phone and data service providers as they used to 

provide various bundles of services under the same head at a discounted price . 

Though with time it has now become popular in every sector of market , encouraging 

buyers to make purchase of related goods or more of same goods for discounted 

price, resulting in increased order size .

Ex- Departmental stores offering, One box of cereal @Rs.70/-, while bundle of Two 

boxes of the same product @Rs.120/-, costing Rs.60/- per box to the customer .

Or selling a bundle of mobile phone and its accessories at a discounted price.


9. Seasonal Discounts -


Popularly known as End of season sale, i.e. offering discount on products which are 

running slow due to season or time period. It encourages customers to buy products 

in advance for the upcoming season or year . For example - Offering Sweaters, 

Jackets and winter wear at discounts in summers or selling raincoats in winters at 

discounted price .

It help business to clear its remaining inventory of last season and customers to get 

products in advance at cheaper prices.


10. Trade – in Discounts


It refers to selling goods at lower price when the buyer gets older product exchanged 

while buying the new product . Earlier it was only popular in durable items such as 

kitchen utensils but with time it has now made its place in various sectors as some 

cloth brands have started giving certain percentage off when buyer drops off his 

used clothes at the store while buying new clothes.

For example – A business offers Rs. 500/- off when the buyer trades-in or exchanges 

his older mixer while buying a new one .

It not only provides value to buyer and seller but also to society as it promotes 

recycling and upcycling aiding ecological and environmental needs.


11. Email or Funnel Discounting -


This refers to providing discounts when a customer reaches business through an 

email or certain part of funnel, it drives customers to business as they become leads 

and potentials for business by reading email or DM an using code provided in that to 

get the discount.

It also includes providing discount to customers who have subscribed to business’s 

newsletter, providing them tangible value of money spent.

For example – Sending a mail to prospect along with a discount code or coupon in 

the mail, and when the prospects reads the mail, can use that code or coupon to 

get a discount while making a purchase.


12. Loyalty Discounting -


Last but not the least, comes the most useful and effective way of discounting, i.e. 

loyalty discounting. This program offers discounts to revisiting customers, enhancing 

loyalty creation and value for customers. It refers to rewarding or offering discount to 

customer when he makes certain points or reaches a threshold of a certain amount. 

For example – When the total lifetime purchase of customer reaches Rs.20,000, he 

gets the coupon for a 20% discount.


This discounts keeps customer within the business funnel, sparks emotional bond 

with business and creates loyalty within customers, as they keep revisiting the 

business either to redeem their points or because they feel valued and feel certain 

sense of emotional connection with the brand.


No matter which type business, but discount is used by all and what is important is 

the creation of the value of discount and reward in the customer's mind.

Fayda Shop - A custom acquisition- retention and marketing application, helps to 

create this value offered by business at 10X value to its customers using it’s own 

Crypto currency – Fayda Coins .


Fayda Shop provides with Fayda Coins to business listed on Fayda Shop, business 

can use these coins to reward it’s customers and also use these coins for it’s 

promotion & marketing by Fayda Shop.


Fayda Shop is working on building a Blockchain based ecosystem for local business,  

providing them support to use weapon of discounting to fight with online giants and 



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