Chapter 1: What is the significance of discount promotions?
Discount promotions. A discount turns wants into haves. Why pay more when you could pay less? Understanding discount offers. Fundamentally, free and discount offers operate very similarly from a money model perspective. Basically, they create a perceived value discrepancy that on its own can drive action. That being said, I personally am not a big believer in marginal discounts, say 5-25% off.
It's just not enough to drive real behavior in my opinion, and basically just cuts into margins.
Chapter 2: How do discounts influence consumer behavior?
Instead, we're just going to be talking about massive discounts, 50% or more. Those are the types of numbers that people respond to. And they drive action from a population that otherwise wouldn't act. And that's what you have to accomplish with a free or discount offer. It has to get people who wouldn't otherwise consider it to respond.
Note, most of the time when talking about discount offers, they will only make up a component of your offering, not the entire thing. While there are a handful of notable exceptions, in most instances, a discount offer is a piece of the thing, not the entire thing. With hope, that makes sense. If it doesn't, the examples will illustrate it. Four ways to display discounts.
So let's imagine we start a lemonade stand. I say to you, I want to try one of these discount offers out. What do you think? I think we'll be able to get more people to respond to my efforts with some sort of discount, but I don't know where to start. You might say, great question. You're going to have to test it, but I'll show you my framework that I use to test discounts.
It'll automatically get you thinking differently about how to display offers from here on out. You see, there are four ways you can display a discount.
Chapter 3: What types of discounts drive customer action?
Knowing them is important. People respond differently to the same discount displayed differently. There are probably others, but these are the four that I find most common and have been tested and used effectively. Let's look at our own business and try all four. You'll notice that sometimes it fits and other times it doesn't.
Whether we are selling something premium or in higher volume, the price of the offer many times informs what will make the most sense for us. Let's imagine we have an Ultimate Lemonade bundle that is three bottles a day for $30. The numbers don't matter, by the way. Well, that's what we're gonna promote four different ways. New client special, first week of Lemonade, $29 instead of 210.
Number one, percentage off. New client special, 87% off first visit. Number two, absolute amounts off. $181 off first visit, normally $210. Number three, relative equivalent off. A, save a steak dinner. B, less than going out to lunch. Four, simply the discounted price.
$29 new client special. Do you see how different all these look and feel? It's the same exact promotion, just communicated differently. By cycling through all four, you can test which resonates best in your audience. If you find multiple winners, even better. It gives you more bullets in the chamber when a promotion fatigues.
Before you just read to the next section, think about other ways you could use a discount for your own offer.
Just do the exercise in your head and flex your brain muscles. Pro tip, use absolute prices when talking about understood products and services.
In order for a simple discounted price with no other elements around it to be effective, the service will usually have to be one that's well understood. People should already have an idea of what it costs. This is where discounts do well.
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Chapter 4: What are the four ways to display discounts effectively?
If you discount something that people don't understand, the offer won't be effective. The only way around this would be to state the price, then state the discount, like in the absolute amount off example. An example that would not work with this would be 50% off agency retainer. No one knows what the agency does or how, and agencies have a wide range of costs.
So there would likely be a better offer that could be made that would be more easily understood. Just like before, we're going to flip roles and have you explain the pros and cons of discounts to me as though we were considering it for our business. Pros of discount offers. Me.
But wait, so now I know how to display discount offers, but why would I choose a discount offer over a free offer to get more leads, if free is the most powerful? You. There are a host of benefits that discounts get that free offers don't provide.
You must match the right tool for the job. Let me explain. Number one, lots of cheap leads within the law.
Me, so it's illegal to market free stuff? You, of course not. But in some countries, if you have any stipulations or creative offers around free, they are forbidden. Discount offers allow us to advertise compliantly and still generate a decent amount of lead volume. This is especially true when compared to a premium offer, the only other alternative. Me, got it.
So it allows me to market in ways that otherwise wouldn't and still get good lead volume. Note, if you're in a heavily regulated industry, state or country, then a discount offer may be the right thing for your business. Number two, you actually collect some money. Me, so we collect money for people who buy the discount, but won't that not amount to much?
You, correct, it won't amount to much money, but it can still help liquidate acquisition costs. But we will never build our business to use this money as the real way that we're liquidating our costs. This is just the first way for us to attract and transact with a customer.
Me, got it, so I can collect some cash up front I otherwise wouldn't, which is nice, but I shouldn't rely on it to fund my marketing efforts. Bingo. Number three, people come in expecting to spend some sort of money. Me, so I guess the difference between these leads and free leads is that these folks at least expect to pay for something, so it won't be a shock for them.
You, honestly, this is more of a mental benefit than anything in my opinion. Many business owners and or employees have crazy limiting beliefs around selling and consumer buying behavior. Not you, of course. So giving them something where they feel like the prospects are coming in or opting in ready to spend money makes them more invested in the selling process.
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Chapter 5: Why choose discount offers over free offers?
Enhancing your Grand Slam offer with a free or discount front end is the fastest way to do that. This applies whether you are just figuring out your first acquisition channel or you're adding an additional acquisition channel. Always remember, generate flow, monetize flow, then add friction.
In that order, I said this in the beginning, I almost always start with a free or massively discounted offer so that I have something to benchmark and then improve upon. Fundamentally, to make this process work, you must know your business and your product better than your customers do. Why?
Chapter 6: What are the pros of using discount offers?
Because all businesses capitalize on an information advantage, as in we know more about our customers' problems than they do. We capitalize on this advantage by making them aware of all the other problems they're going to encounter on their journey, then capitalizing on that through upsells. This is how you design a winning acquisition strategy.