How to use First Order Discounts to Increase Conversion Rate for Ecommerce Brands and Marketplaces?
First order discounts are a key tactic in e-commerce for encouraging initial purchases and improving activation rates. This concept examines their role and strategic application.
The Role of First Order Discounts:
Objective: To entice new customers by offering a price reduction on their first purchase. This strategy can lead to a notable increase in conversions by lowering the initial purchasing barrier.
Example: An online home decor store offers a 10% discount on first-time purchases, aimed at attracting home improvement enthusiasts to explore and buy from its unique product range.
Considering Revenue and Activation Balance:
Impact: While effective for increasing activations, such discounts can impact revenue per transaction. A crucial aspect is monitoring the quality of customers these discounts attract - are they bargain hunters or potential loyal customers?
Example: A digital bookshop using a 15% introductory discount needs to assess if the increased initial sales translate into recurring purchases or just attract one-time deal seekers.
Finding the Right Discount Level:
Strategy: Determining the optimal discount rate involves analyzing its effect on customer acquisition against potential revenue reduction. The goal is to find a balance that maximizes overall profitability and ensures sustained customer interest.
Example: A gourmet food e-commerce platform experiments with various discount levels to gauge their impact on both initial and subsequent sales, focusing on retaining customers who value quality over discounts.
First order discounts can be highly effective in e-commerce to kickstart customer activation. However, their success hinges on careful strategic planning, understanding customer behavior, and balancing immediate gains with long-term business objectives.