Update: As of April 1, 2016, Shopify has updated the discount feature to allow codes to be limited to one use per customer, based on the email address. This post has been updated to reflect this and offer tips on how to prevent abuse of the first order only feature. See the "First orders only" section below.
For most Shopify store owners, using discount codes and coupons with Shopify themes are a double-edged sword. Sure, they’re great for getting new customers and encouraging purchases, but they can also create headaches from a business standpoint.
However, using discounts doesn’t have to mean bleeding money left and right — if you follow these tips and ideas.
When considering how much of a discount you offer, be sure to analyze how much revenue you’re willing to lose to gain a specific order.
This exact amount will vary greatly based on your product line and profit margins, so be sure to consider all of the factors.
Also, don’t forget that discount codes can be adjusted to only be valid (or not valid) on certain products, collections or order totals. This can be a great way to create enticing offers that still make sense from a financial standpoint.
For example, higher margin items or clearance items that represent inventory you need to move out can all be placed in a collection that is eligible for higher discounts. Keep in mind that you can create collections soley for this purpose that don’t appear in your navigation menus.
If your goal is to gain new customers, you may be able to tolerate a higher loss — but this is typically only a good strategy if customers are likely to make future purchases that can be more profitable.
That said, this “cost to acquire” strategy can cause other issues, especially since the Shopify platform is unable to limit discounts to first time orders only (more on that in a bit).
While Shopify now supports limited discount codes to one user per customer, keep in mind it’s relatively easy for customers to “game” the system by using an alternate email address or credit card to get around this limitation.
There are a few possible ways around this limitation:
For truly chronic abusers, you can always consider canceling the order and contacting the customer directly and, politely but firmly, explain the discount is not valid for existing customers and they are welcome to place another order without the code.
If appropriate, you could consider offering an alternate discount, perhaps at a lower discount or with a higher minimum order.
While it may seem counterproductive to refuse an order, consider that customers who repeatedly abuse the system may not be worth keeping as customers.
Try experimenting with different offers — such as free shipping vs. a percent off vs. a set dollar amount off. Try running one offer prominently for a specified period of time, monitor order sizes that utilize it, and then try another for the same amount of time.
To be sure the results are valid, you may want to avoid running these tests during holidays or other higher traffic times and, if two time periods have significantly differing traffic levels, let the experiment run longer until the numbers are more even.
Often free shipping, percentage and flat dollar discounts end up being relatively the same value, but there are numerous psychological factors that vary greatly based on your customer base and product offerings that may make one offer or another appear to be a better deal.
There are many ways to get the word out about your special offer:
It’s also a good idea to make sure your terms and conditions cover discount codes. Even if you never enforce these policies, it’s better to have some text to reference during customer service issues that may arise.
Some good points to include may be:
One phenomenon that’s been observed in multiple ecommerce studies is that, during the checkout process, customers who see a field for entering a discount code will abandon their cart if they aren’t able to get a discount.
In a way, it’s a bit of an odd Catch-22: You obviously want your discount code field to be visible for customers to use, but just by having it shown can send price-sensitive shoppers elsewhere.
However, many store business models adhere to the idea that it’s better to process a discounted order rather than lose a full price one.
There are, however, a few ways to avoid this and make your funnel more slippery:
When creating discounts using these methods, it’s a good idea to use different codes for each strategy so you can track which sources are bringing in the most customers and, if necessary, adjust your offer up or down based on the profitability of the orders that come in via that source.
Even if you opt to not cater to deal-seeking shoppers, another effective strategy can be creating a page, as described in the first point above, but, instead of listing discount codes, include some thoughtful content about why your store doesn’t offer discounts. For example:
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It’s one of the most important pages on your Shopify store — but it’s surprisingly often one of the most overlooked parts. It’s also where your customers spend much of their time learning about your store and becoming engaged with your brand. What is it?