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Discounting in Indian ecommerce is a DOUBLE-EDGED SWORD. 

Slash prices too much, and your margins bleed. Offer too little, and customers abandon their carts.

Somewhere between burning money for conversions and protecting profitability, there’s a sweet spot—one that smart D2C brands must find if they want to scale sustainably.

1. The Cost of Discounting: What’s at Stake?

Most brands underestimate how much revenue they lose due to excessive discounting. Let's break it down with an example:

If your net profit margin is 20%, running a 20% discount without volume growth means zero profit. That’s not a promotion; that’s a charity.

For sustainable discounting, you need to answer:

1️⃣ How many extra units must you sell to cover the margin loss?
2️⃣ Which customer segments actually need a discount to convert?
3️⃣ At what point does discounting lead to price dependency?

2. The ‘Promotional Lifecycle’ of a D2C Brand

Discounting starts as a growth hack but often turns into a profit killer. Here’s how most brands fall into the trap:

1️⃣ Launch Phase – Heavy discounts to acquire first customers.
2️⃣ Growth Phase – Sales grow, but discounting becomes habit-forming.
3️⃣ Stagnation Phase – Customers only buy during sales. Profits start eroding.
4️⃣ Discount Dependency – You need to offer higher discounts just to maintain revenue.
5️⃣ Brand Devaluation – The brand loses pricing power. Customers stop buying at full price.

This cycle is dangerous, but avoidable if you set up a structured discounting strategy.

🚀 The 3 Core Pillars of Smart Discounting:

Instead of offering blanket discounts, build a system that incentivises full-price purchases and rewards only the right customers with discounts.

1️⃣ Customer Segmentation – Not every buyer needs a discount. Identify who does.
2️⃣ Purchase Behaviour Analysis – Study buying patterns to understand when discounts drive conversions.
3️⃣ Profit-Driven Discounting – Ensure every discount protects your margins.

These three pillars ensure that every rupee spent on discounting actually drives sustainable growth instead of just boosting short-term sales.

3. Who Actually Needs a Discount? Customer Segmentation for Smarter Promotions

Not all customers need a discount to convert. The challenge is identifying who actually does and tailoring your discounts accordingly.

Common Mistake:
A brand offers a 15% off coupon to everyone who visits their site. A customer who was already ready to pay full price now happily applies the coupon—you just lost 15% for no reason.

The smarter approach? Segment customers based on behaviour and intent.

📌 The 5 Key Customer Segments for Smart Discounting:

1️⃣ Full-Price Buyers (No Discount Needed 🚀)

• These customers buy regardless of discounts.

• Example: A customer who always shops new arrivals and doesn’t wait for sales.

• Strategy: Keep them engaged with early access to collections, not discounts.

2️⃣ Deal Seekers (Discount Needed ✅)

• They only buy during sales.

• Example: A customer who adds to cart and waits for festive discounts.

• Strategy: Instead of giving blanket discounts, offer limited-time urgency-based deals (e.g., 24-hour flash sale).

3️⃣ Cart Abandoners (Targeted Discount 🎯)

• They add products but don’t complete the purchase.

• Example: A user abandons a ₹2,500 cart.

• Strategy: Use tiered discounts (e.g., ₹200 off ₹2,500+, ₹500 off ₹5,000+) to encourage higher spend.

4️⃣ First-Time Visitors (Acquisition Discount 👋)

• New users who need an incentive to try your brand.

• Example: A user who landed from Instagram ads but isn’t converting.

• Strategy: Offer a small first-time discount (e.g., 10% off) and guide them into post-purchase retention loops.

5️⃣ Loyal Customers (Retention Discounts 🏆)

• Repeat buyers who deserve rewards.

• Example: A user who has purchased 5+ times in 6 months.

• Strategy: Instead of discounts, offer exclusive perks like free shipping, early access, or VIP pricing.

Key Learning: If you don’t segment your discounts, you’re giving away money to people who don’t need it.

4. The Science of Discount Effectiveness: A/B Testing Your Strategy

Every brand needs to test and optimise its discounting. Here’s how:

🔬 Step 1: Set up A/B tests

• Group A: Shown a ₹500-off discount

• Group B: Shown a "10% off" offer

• Measure which drives better conversions without eroding profits.

📊 Step 2: Analyse Purchase Patterns

• Do repeat customers always wait for sales?

• Are new customers converting only when discounts are applied?

🔄 Step 3: Adapt & Adjust

• If discounts become necessary for every purchase, reduce frequency to reset customer expectations.

Simple facts:

🔹 60% of customers will wait up to 3 months for a discount.
🔹 28% of Indian online shoppers only purchase during sales events.
🔹 Brands that run frequent deep discounts see a 25% lower retention rate compared to those that use strategic discounting.

5. Discounting Across the Customer Journey: Pre-Purchase, Purchase & Post-Purchase

Now that we know who actually needs a discount, let’s map out a discounting strategy across the entire customer journey. The goal? Maximise conversions without eroding margins.

A) Pre-Purchase: Warming Up Potential Buyers (Without Giving Away Too Much)

At this stage, customers are in "research mode." They’re browsing, comparing, and often looking for the best deal. Instead of instantly throwing discounts at them, use data to decide who actually needs a discount.

📌 Tactics for Pre-Purchase Discounting:

B) Purchase Stage: Converting Intent into Sales Without Devaluing the Brand

Once customers add items to their cart, they’re already considering buying. At this point, your discounting should push them towards completing the purchase—without cutting too deep.

📌 Tactics for Purchase-Stage Discounting:

C). Post-Purchase: Retaining Customers Without Over-Discounting

Instead of constant discounts, create a system where loyalty and engagement are rewarded.

📌 Tactics for Post-Purchase Discounting:

🔑 Key Takeaways

✔️ Pre-purchase: Identify high-intent users before offering discounts.
✔️ Purchase stage: Use urgency, tiered pricing, and prepaid discounts to boost AOV.
✔️ Post-purchase: Reward loyalty without training customers to expect constant discounts.

🔥 Want to discuss how to set up ‘Smart Discounting’ for your D2C brand? Reply to this email or book a strategy call. 

Let’s make it happen.

That’s the end of our talk on “📦 Smart Discounting for Indian Ecommerce.”...

☕ See you on the next coffee date!

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