

Ask HN: Best practices around discount offers? - snoonan

We have a lot of choices when deciding when to offer discounts as incentives for our free users to upgrade to a paid product.  We have had very impressive results from our discount campaigns in the past, so we know it works well, at least in our case! The problem is that we don&#x27;t REALLY know if we&#x27;re leaving a lot of money on the table and just doing it completely wrong. Valid testing is hard because we have a small number of buyers paying a relative high price.<p>Should we send them when sales are slow?  Should we send them when sales peak, reducing friction among people CLOSE to buying already? Should we just work on modeling behavior and offer them on a case-by-case basis?<p>Do any best practices exist around this?
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jmedwards
What do you define as an 'impressive result': increased unit sales? Are you
signing up people who absolutely would not have signed up over time? Are you
looking at number of sales and signups only, or are you also considering your
margins?

> Should we send them when sales are slow? Should we send them when sales
> peak, reducing friction among people CLOSE to buying already? Should we just
> work on modeling behavior and offer them on a case-by-case basis?

Why don't you flip the question around: Everything has a value and a price. I
assume in this case these customers would buy eventually. What is that
'eventually' and what price are you wiling to bring forward those sales and
have that money sooner rather than later?

~~~
snoonan
Fair questions! increased unit sales and we're up over 20% in total revenue
for the same period last year. We did our first back in March where we were
actually declining year over year for this product. So we're confident to say
it's a long term good play.

On your second point, there is some time element to the buyer's calculus, we
think. We're in the language learning space and people tend to trail off of
their initial momentum after a few months. We think this translates to lost
sales, which is why the extra push seems to really make a difference. To say
we would get the same result from offering the lower price all the time may
not be a fair statement given the fear and discomfort around making the choice
to buy or not to buy.

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scottishguru
There should be no need to hold a sale. In the long to medium term, reducing
prices has never been the answer. By this stage you should've already worked
out where you are in the market and what your optimum price point is.

You should focus on providing the very best service possible and work out,
from your customers' perspective, how you can add value to your product.

Once you've done this you'll be surprised at how less important a factor the
price become to new customers. Also, these new customers will stay with you
longer as they aren't fickle about price and so won't jump ship as soon as
something a few pennies cheaper comes along.

Feel free to drop me an email for a chat: fortitude3141@gmail.com

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snoonan
Thanks! We have 5 years of sales on this mature product and know the space
well. It surprised us that the discount offers were effective since we had a
handle on when people buy after first visiting, etc. The push made by the
discount offer really does make more people buy and overall increases our net
profit.

It's a one-time purchase. We raised prices by 50% two years ago and saw a big
jump in revenue. We could probably go up another 25% to the next price point
and still do about the same.

While this advice is very good and it's what we try to do, the original data
still show offering the discount makes us more money. Maximizing the timing of
the discount offer is still worthy goal. I hope that sounds like a fair point.

~~~
scottishguru
I should've added the caveat that I was speaking 'generally', so apologies.

I am interested to know... What percentage of your sales are at a discounted
rate? Are there spikes in volume centred around discount periods?

~~~
scottishguru
After doing some (very brief) research, the average price point for you
product is between $130 and $150. Your discounted price is at the top end of
this scale. Also, the fact that so many of your sales come from your
discounted rate suggests that your regular rate needs to be (urgently)
revised.

Also, have you ever tried providing monthly, quarterly or 6-monthly access to
your product instead of a lifetime access?

~~~
snoonan
I'm not sure if you caught the other post, but the discounted rate is the
price we charged for a few years. Only after revising it UP did we hit a new
higher plateau on revenues. Then discounting it these two times in a "sale",
we again hit another increased plateau. The market has no memory of our price.

We started originally with monthly, 3 month, 6 month and 12 month access. The
LTV of the customer was less and the satisfaction was much lower. Since we
promise language learning results, a common sentiment was that they were
penalized for learning slowly. When we charged a fixed price, people were more
committed, got better results and were happier.

I guess what I'm asking is how can I know that reducing the price to the
discounted rate will result in an increase in sales since we already priced it
this way in the past. I would actually very much like to have a sub $100 price
point, but i'm pretty sure we won't make it back in increased unit sales.

