During the holidays, you might be tempted to offer steep discounts to get your share of the seasonal spending pie. According to Made In CA, Canadians planned to spend $1,347 during the 2023 holiday season. However, discounting your products and services isn’t always a strong marketing strategy, especially for small businesses.

In this article, we’ll discuss why discounting might not be the best strategy for your business. Then, we’ll offer alternatives to deep holiday discounts, including ways you can market, add value, and attract the right kind of customers.

The Problem with Discounting

Customers have been conditioned to expect discounts. Many customers even plan their holiday shopping around discounts, waiting for Black Friday deals before purchasing.

Discounts are not bad in themselves. They can certainly attract new customers and drive sales volume. While discounts may temporarily spike sales, they continue to train customers to expect discounts.

But you can attract customers and add value to their experience without discounting your product. Customers are trained to expect discounts and won’t purchase unless they think they are getting the best price.

Tip: Often what holds back a customer from making a purchase isn’t the price; It’s that they’re afraid to pay full price only to see the item discounted later. Price guarantees help customers make purchases confidently, knowing they got the best deal.

The problem with discounting is that when you slap on a discount, you enter an arena of price-to-price combat. Mega retailers like Amazon and Walmart have the resources to beat you on offering a lower price. You enter a race to the bottom that’s unsustainable for a small business.

Discounts also attract “price shoppers,” who are finicky and might not be the right customer for you.

Price Shoppers vs. Life-Long Customers

Which customer do you want?

The Price Shopper

• Seeks out the lowest possible price with coupon codes, sales, and special offers before making a purchase.
• Only makes a purchase if a product is deeply discounted.
• Expects free shipping.
• Prefers quantity over quality, looking for more items at a lower price vs. a few high-quality items.
• No brand loyalty, quick to switch brands if a competitor offers a better price.
• Frequently returns items that don’t meet their expectations.
• Impulsively makes purchases based on discounts and promotions.
• Only interaction is through transactions. They do not follow the brand on social media or engage in a meaningful way.

Life-Long Customer

• Values quality, overall shopping experience, and customer service.
• Comes back consistently to make purchases during non-sale periods.
• Will pay shipping costs or add to cart until free shipping minimum is met.
• More likely to make higher-end purchases or buy premium versions of products regardless of price.
• A loyal and trusting advocate of the brand, recommending it to friends and family.
• Will wait for restocks rather than switching to another brand.
• Engaged, following the brand on social media and participating in events and communities.

Now that you’ve seen the differences between a price shopper and a life-long customer, who do you want to attract to your business?

If you rather welcome life-long customers than price shoppers, then you need to learn how to market to them without discounting your products.

How to Market Without Discounting

Instead of discounting, you want to follow price strategies that preserve your profit margins and pursue marketing strategies that add value to your customers. Big brands use this strategy to great success.

In his Inc. article, Margo Aaron shared examples of two brands, A Pea In The Pod and Athleta,  that did not offer steep discounts during the holidays.

“A Pea in the Pod’s offering is so specific and so valuable to their market (high-end clothing for women who are expecting) they didn’t even feel the need to compete,” said Margo.

Athleta, an athleisure company, has such a strong brand that sells high-priced leggings that are still $100 after a 20% discount. Customers believe that the product is worth it and will pay full price for its products, according to Inc.

Big brand examples prove that discounts are not the only way to attract customers during the holidays.

Here are some ways to add value without offering a discount:

1. Offer free gift wrapping featuring branded festive packaging materials.
2. Create checklists and guides, like holiday shopping maps and preparedness checklists.
3. Have holiday contests and giveaways in collaboration with other small businesses.
4. Offer price guarantees so customers know they’re getting the lowest price.
5. Offer limited edition and seasonal products and offerings.

Holiday Discount Strategies for Small Businesses

If you are still experiencing FOMO, or fear of missing out, regarding holiday discounts, don’t be distressed. Small businesses can use a few discount strategies to preserve their profit margins while still giving customers that “winning” feeling that shopping during a sale can bring.

Offer Bundled Discounts

• Lower the price of a group of items bought together.
• Helps to increase the number of items sold.
• You can sell popular and less popular products together.
• Encourages customers to try other products.

Volume Discount

• Customers pay less per item as long as a certain volume is reached.
• Good for clearing inventory and increasing average value per order.

Free Shipping

• Can increase sales and reduce cart abandonment
• Have free shipping available when an order reaches a certain amount
• Customers are trained to expect free shipping from shopping habits at big box stores like Amazon and Walmart
• Having to pay for shipping can cause people to abandon carts and purchases

Additional Resources

• Holiday Prep Checklist for Small Businesses
  This checklist was created to help small business owners successfully navigate the holiday season. From staffing and inventory management to marketing and customer service tips, we talked to small business owners just like you to learn how to make the most of the season.
• Key Holiday Shopping Dates for 2024
  A list of key dates to add to your 2024 calendar so you’re prepared for early-bird or last-minute holiday shoppers.
• Meta Holiday Performance Playbook
  This resource from Meta will help you make sure that your holiday ad campaigns on Instagram and Facebook take full advantage of sales opportunities.
• Reddit’s 2024 Holiday Insights
  Learn how shoppers look for gifts on Reddit and how you can join the conversation and convert visitors into customers.

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