Take a look at the next promotion you have planned. What’s the product’s gross margin and how much of a discount are you offering? Subtract the discount from the margin, then divide the discount by what’s left.
Let’s say you’re offering 20% off a product with a 50% margin. That’s 20 ÷ 30, or about 0.67. In other words, you’d need to sell roughly 67% more units than you would at full price just to make the same gross profit.
That’s a pretty big jump. So how do you make the promotion worth it? Start by targeting customers who probably wouldn’t have purchased otherwise. Choose products with enough margin to absorb the discount, and consider setting a minimum spend to encourage larger orders.
By the end of this post, you’ll have a plan for doing exactly that. We’ll walk through how to use your customer data to choose the right audience, set a minimum spend based on your actual order values, and check back 60 days later to see whether the promotion really paid off.
Your ecommerce discounting strategy needs a clear purpose for every promotion or coupon code.
Campaigns can focus on acquiring new customers or re-engaging existing ones. Others may aim to increase average basket size, support a new product launch, or move excess inventory. But knowing what you want a promotion to achieve is only half the equation. You also have to identify the customers and products it should target.
Segment customers and target discounts
Sitewide discounts can incentivize customers who need them but also reach shoppers who would have purchased anyway. They can boost slower-moving products while your bestsellers sell without the markdown.
Segmentation lets you narrow the audience to customers whose purchase history, interests, or buying patterns fit the promotion. For example, to bring back lapsed customers, send the offer to people who haven’t ordered in months. Customers who buy every few weeks don’t need the nudge.
If you design an offer to clear excess inventory, it should cover those items without also marking down your bestsellers.
WooCommerce gives you data to guide those choices. Under WooCommerce → Customers, filter reports by order count, total spend, or average order value to identify groups like one-time buyers or high-spending customers.
Then check Analytics → Products and Analytics → Stock to find products with slow sales and ample inventory. These items could use a promotional push.
Provide individual discounts when it makes sense
An individual coupon code gives one customer a trackable offer. You can send the same discount to multiple customers while assigning each a unique single-use code. This lets you connect each redemption to its recipient and see what they purchased.
When you connect Klaviyo to WooCommerce, you can generate those codes and include them in automated emails based on each customer’s activity. For example, an abandoned cart sequence could:
- Send a reminder: Make it simple for the shopper to return and finish checking out.
- Resolve hesitation: Answer common questions about shipping, sizing, or returns.
- Introduce an individual offer: If they still haven’t purchased, send a limited-time discount with their own coupon code.
Configure the sequence to stop upon purchase. This means a customer who buys after the first reminder won’t get the discount code.
For abandoned cart promotions, limit the discount to first-time buyers so returning customers don’t learn that leaving checkout is a reliable way to get a coupon.
Make the discounts lead somewhere
If you offer a discount to win a new customer or contact, plan out how you’ll earn their next purchase before you send them the coupon.
Suppose a skincare store discounts a starter kit for first-time buyers. After it arrives, the customer receives tips on how to use the products. A few weeks later, a follow-up invites them to order the full-size version of a popular item. The initial discount helps them try something new, and the follow-up builds on their experience.
AutomateWoo helps you manage follow-ups within WooCommerce. You can schedule emails around the products customers purchased, including replenishment reminders timed to when they’re likely to run out.
Your discount gets someone in the door and through checkout. Helpful follow-ups give them reasons to return without waiting for another offer.
A 20% discount can cut your profit more than you expect. Let’s crunch some hypothetical numbers.
Suppose you sell a product for $100 and it costs you $50. You earn $50 in gross profit per sale. If you discount the price by 20%, you collect $80, and the product still costs $50. Your gross profit drops to $30.
That’s a 40% reduction in gross profit per unit. You’d need to sell about 67% more units just to generate the same total gross profit. And that calculation comes before any extra fulfillment or marketing costs from handling a higher order volume.
For other percentage offers, use this shortcut:
Additional units needed (%) = discount rate ÷ (original gross margin rate − discount rate) × 100
With a 50% gross margin and a 20% discount, that’s 20 ÷ (50 − 20) × 100, or about 67%. Use both rates as percentages of the original price. This assumes unit costs remain unchanged and the discount is smaller than the original gross margin.
Choose the right discount structure
WooCommerce includes three built-in coupon types:
- Percentage discount: Take a percentage off eligible products.
- Fixed cart discount: Take a set dollar amount off the cart.
- Fixed product discount: Take a set dollar amount off each eligible item. A $5 discount on each eligible item becomes $20 USD off when a customer buys four. Use “Limit usage to X items” under the coupon’s usage limits to cap the number of discounted items.
The difference between these options becomes apparent as customers add more to their carts.
You can add a minimum spend to any of these. For example, a $20 USD fixed cart discount with a $100 minimum creates a “Spend $100, save $20 USD” offer.
Assuming all items qualify, that discount stays at $20 whether the customer spends $100 or $150. A 20% discount, however, grows from $20 to $30. Both methods offer the same initial savings, but the fixed discount leaves you more revenue as the cart grows.
Determine the spend threshold for increased profit
Use your average order value (AOV) to inform the right spending threshold, then check whether the extra items cover the discount and protect your margins.
Suppose your average order is $80 and your gross margin is 50%, leaving $40 in gross profit. You offer $10 off a $100 purchase. If the additional $20 in products also earns a 50% margin, it contributes $10 in gross profit. That’s exactly what the coupon gives away.
Your customer spends more, but you still earn the same $40 in gross profit. At the same margin, a $110 basket with a $10 discount leaves $45 in gross profit, $5 more than the original $80 order, before additional fulfillment costs.
But customers who already planned to spend $100 or more also qualify. Check how many orders normally exceed your proposed threshold before deciding what you can afford to offer.
In the WooCommerce coupon settings, use Minimum spend to set that threshold. Restrict eligible products or categories, exclude sale items, and select Individual use only to prevent customers from combining the offer with other coupons.
One thousand coupon redemptions show customers used the offer, but you need to know whether the promotion served its purpose.
Judge the campaign on whether it got the desired behaviors. Did it lead to bigger carts? Did the overstocked items actually sell? Did first-time buyers come back?
In Analytics → Coupons, WooCommerce reporting shows each code’s order count and total discount amount. Select the order count to view the orders that used it. Then use the broader Analytics reports to examine net sales after discounts and refunds, average order value, and products sold. Compare similar periods and account for differences such as holiday traffic or increased ad spend.
Include your product costs in that review, too. As the math above shows, higher sales don’t necessarily mean more profit.
For acquisition offers, follow new customers beyond their discounted order. Use purchase history in your store or connected marketing platform to examine whether they buy again, how soon they return, and whether they pay full price.
If you have enough customers to run a meaningful test, randomly hold back an offer from a small portion of the eligible audience. For each group, take sales after discounts and refunds, then subtract product and variable costs like payment fees, fulfillment, and campaign spending.
Divide what remains by the total number of people in that group, including those who never bought. Compare results over the same period to estimate whether the offer generated enough additional business to cover its cost.
Here’s a small experiment to try before your next big promotion.
Open WooCommerce → Customers and find a group of shoppers who have only ordered once. Randomly split them into two groups. Send one group a coupon for $10 off their next order of $75 or more, assuming your margins can support it. Leave the other group without a discount.
After 60 days, compare the results. How many people in each group placed another order? How much did they spend? And, most importantly, how much profit did you earn per customer after accounting for discounts, product costs, and other variable expenses?
Don’t forget to include those who didn’t buy anything. You’re trying to find out whether the coupon generated additional profitable sales, not just how much the people who redeemed it spent.
If the discount group generated more profit per customer, you’ve got a promising offer worth testing on a larger audience. If it didn’t, you’ve learned something useful before committing more of your margins to a bigger promotion.
About
Tautvidas Sipavicius
Tautvidas is a product manager for WooPayments, WooCommerce and MailPoet emails.
