Marketing discounts

In an attempt to drum up business, many retailers respond by dropping their prices in a sale which admittedly is not always the best approach but is sometimes necessary.

The question arises, if it is done is it better as a percentage (say 10% today) or a dollar figure (say $10 off if you spend over $100 today)

Percentage discount

Take off a certain percentage.

This is by far the most popular. It is easy to implement. Small and significant customers can use it, whether they come for a $3 purchase or a $5,000, you have a deal for them.

Dollars off

Take off a flat dollar amount if a customer purchases over a certain amount.

One big plus here is that if say its 5% off today if a person buys over $100, the customer buys $120 of good well you have picked up a of margin on $20, which is not discounted.

Another plus is that a dollar figure is something real, a percentage is a bit vague. $50 off a $1,000 purchase is real and in some industries is an attractive offer, .5% off a $1,000 is also $50, but it does not look compelling,

One problem here is if I am looking at a small item say $3, your discount is of no interest to me nor would it be much interest to me if I was looking to buying a large object, say $5,000. This problem can be overcome but only by complicating the offer.

In practice, it is difficult to tell, which is superior some people have said to me that a percentage discount works better some that they prefer a dollar discount. This tells me that the right answer depends on your business.

Both are easy to fine tune if the numbers do not hold up, you can move the discounts, up and down.

The decision is up to you, try a test and see what happened.

Our point of sale software can handle both types. It is not a computer problem but a management one.