Etsy's Handmade Blog
The Art of Pricing: Theories in Discounting
Story by bethela
Published on November 7, 2007 in How-To 		Photo by roslynscloset
We have received several inquiries about how to conduct a “sale” or how to discount.  Most people believe that discounting is a pricing concept, but really it is a marketing concept. When thinking about discounting you need to think about how this discount compares to other potential marketing strategies you can implement, such as promoting your items on your blog, offering free gifts or purchasing a showcase spot.  A discount is just one way to entice a customer to buy.

A discount or sales promotion is intended to be all about “action” or an immediate sale.  Many use it to create the sense of a getting a deal or a “one-time-only” sense of urgency.  These types of promotions should be used carefully and evaluated against the other promotion options.

A discount or sales promotion can be used to:
  • Induce trial – If you are introducing a new product or entering a new market (such as opening a shop on Etsy) one way to entice people to try your product is to have an introductory price or limited time discount. Many Etsy sellers report that a portion of their sales are made to repeat buyers. If you can establish the initial relationship with a buyer through a discount, it can be worth it in the long run.
  • Encourage additional purchases – This type of discount is when you discount an additional item, such as “Buy one get one for $2 off.”
  • Support volume purchases – As I discussed in the “Preparing for Wholesaling” article, discounts will encourage stores and other resellers to stock your products.
  • Reward your best customers – Some use “friend and family” discount codes to continue to attract top customers.

A few ways to do this:
  • Direct price discounting – Offer a discount to the normal selling price.  Remember increased sales gained from price promotions are at the expense of a loss in profit — so use these types of promotions with care.   You also must be aware of the possible negative effect of discounting on your store or reputation.  You do not want to train your customers to buy on a deal. Vanessa suggests, "You could experiment with a seasonal sale, which frames your discount as a limited time offer meant to move last season's inventory."
  • Free Shipping – Shipping is an added cost for your Etsy customer, so discounting it may encourage that impulse buy.
  • Coupons – Coupons can be a very versatile way of offering a discount.  You can add a coupon into the shipped package to encourage repeat buying or a coupon in promotional material. The goal of this type of promotion is to maximize the use or redemption rate.  Be aware, however, that coupons may simply encourage people to buy what they would have bought anyway. Also, if you use coupons, make sure you have enough inventory in order to not disappoint customers.  Usually, the best use of coupons is for new products or to encourage the sales of existing products that are slowing down.
  • Gift with Purchase – This is not just for the Clinique counter, my friends.  Sometimes known as a “premium promotion,” it is when the customer receives something in addition to the main purchase.  A classic example; “Buy this t-shirt and get a free mirror with purchase.”  It is always nice to add something to your package, even if you are not promoting a gift with purchase. HeyMichelle notes, "I would add that if you are doing a free gift w/ purchase, it is nice if there is a photo of it in one of your extra photos."
  • Group promotion – Band together with a group of artists, like our teams to promote your items together and give a discount. One example is the Etsy Fiber Arts Street team where all members agreed to provide at least a discount of 15% from November 1st – November 15th.

Daniellexo pointed out how to send a revised invoice:
If you want to send your sellers a "discount code" here's a good way to do it.  Include these instructions: 'How to use the code:

  1. First add an item(s) from my shop to your cart and start the check out process.
  2. Enter the code in the 'notes to seller' and the email address where the revised invoice should be sent.
  3. Complete the order but do NOT go to Paypal to pay.
  4. You will receive a revised invoice, and a link to complete payment, via email reflecting the discount.'

Now if you log into paypal you will see an option to request money.  Enter in your buyer's email address and the new total (subtract your discount here) and then send the request!

The Community Team would like to chime in here on the rules and guidelines about promoting your discount:

  • Do talk it up in the forums, on your blog/website.
  • Do change up your avatar with your sale's graphics.
  • Do post a notice in your shop announcement.
  • Do add SALE to your listing's title and to your tags.
  • Under the Dos & Don'ts > Selling > What can be sold on Etsy — "Don't create listings which are solely advertisements or promotions (no item for sale)." You can add text or graphics on top of your item listing, but you must be listing an item for sale!

Used carefully, a discount can help drive sales and acquire customers that will be valuable long-term.  As always, make sure to weigh all the potential benefits with the costs.  Small tests may be a way to gauge how this is working for you.

Beth is an admin at Etsy on the Business Operations Team. She is writing about pricing in a multi-part series, so ask her your questions in the comments below. Last week's topic was how to Prepare your Business for Wholesaling. Next week's topic is Tiered Pricing.

Tags Art of Pricing, business, discounts, How-To, HOW-TO, marketing, pricing, Seller Handbook, selling
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40 comments     Login to add your own!

Nov. 7, 2007 at 12:20 p.m. Alyburd

That pic of the little salesman cracked me up! What a sweet little pumpkin!

Nov. 7, 2007 at 1:13 p.m. charamichele

Great article! Thanks:)

Nov. 7, 2007 at 4:15 p.m. tabo

I must buy that little t-shirt to my boy!

Nov. 7, 2007 at 4:55 p.m. FrucciDesign

thanx
as usual great piece of information!

Feb. 16, 2008 at 10:19 p.m. krtwood

One thing I would add to this is that if you over do it with heavy discounts to drive new sales you'll have people always waiting for your next big sale. Be careful about trapping yourself into a pattern of sale pricing that you can't really afford.

Feb. 20, 2008 at 12:57 p.m. JoelleDolceBebe

I like the free gift idea.
Everyone likes a gift. anything free.
Its also less trouble without all the coupons, codes, etc...
& an added picture of something you could ger free is a VISUAL & people like that.
Thanks for this article.
Im going to try it too,(but figure out how to do it right)
without people waiting for the freebee;s all the time. sooooo im thinking about this one too.
: )

May 30, 2008 at 4:10 p.m. HeidiLeech

Question: regarding the "revised invoice" part of the discount code process, am I missing how, as a seller, I actually revise the invoice? Once I get the email that I've made a sale (with the buyer putting the coupon code in the notes field), do I then go in and revise the price somehow? I can't see how to do it, but maybe that's because I don't have open sales at the moment. Any info on this would help. Thanks! -Heidi

May 30, 2008 at 4:16 p.m. HeidiLeech

Oops ... I think I answered my question. It seems you do the price adjustment within PayPal, not Etsy. Yes?

June 20, 2008 at 9:46 a.m. nansglam

Thanks so much for this valuable info. I am new to Etsy, just starting up, so I am really trying to learn from all the experience of others. There are so many wonderful articles to assist new sellers and I really appreciate everyone's willingness to share!

July 12, 2008 at 12:17 a.m. soulfire77

very informative, thanks!

Aug. 1, 2008 at 8:43 a.m. laurabailliedesigns

great information, thanks for sharing it :)

Aug. 3, 2008 at 12:04 a.m. MilkMaidMama

I'm new here, and am a little confused about the revised invoice. Could someone help me out here? If I revise the invoice on PayPal (not Etsy), does Etsy still charge me the final selling fee (3.5%) on the original price or on the discounted price?

Aug. 25, 2008 at 1:46 p.m. justagirlcreations

Fantastic info and ideas! I'm pretty new and would love to drive more sales and I believe this is a great idea!

Aug. 27, 2008 at 8:40 p.m. KentonBeadworks

Thanks so much for posting this! Great info.

Oct. 21, 2008 at 12:58 p.m. SCcrafts

Thanks for the useful info!

Dec. 23, 2008 at 7:27 a.m. pixiepotions

Thank you for the wonderful articles!

Dec. 26, 2008 at 4:44 p.m. BethanyOgle

Thanks for adding the bit about how to revise an invoice.

Feb. 20, 2009 at 4:58 p.m. bedhead

I have the same question as MilkMaidMama. How do I reduce the Etsy fees taken from the pre-sale price of the item?

Feb. 27, 2009 at 10:21 a.m. FinindianOriginals

I have the same question as MilkMaidMama & Bedhead....I'm new to this....have no sales yet....it seems the more I read, the more I find that I really don't have a clue! Where do I find the answers to these questions....? I've seen several questions from peopl on these and then don't find an answer anywhere in this spot.....help...

Feb. 27, 2009 at 11:02 a.m. pengpengs

Great tips as always! thanks for sharing these ideas with us!

Feb. 27, 2009 at 11:57 a.m. BeverlyAnn

Great info as always.
Thanks.

Feb. 27, 2009 at 1:43 p.m. XOJF

or you could just change each price accordingly?
this seems so much simpler to me.

Feb. 27, 2009 at 3:05 p.m. theStarcraft

LOVE the little CEO!!!

Feb. 27, 2009 at 6:19 p.m. TheToteTrove

Great article! I've been experimenting with free shipping but never considered running special sales or offering coupons. It's something to think about.

Feb. 27, 2009 at 9:05 p.m. samsstuff

Thanks for the article! Lots of interesting ideas. (Love the bee necklace & the raven pins, too bad they're sold out! I'll have to check out the sellers other items!)

March 2, 2009 at 8:28 a.m. herbie1940

Thanks! I'm new to Etsy and need these ideas! Thanks again!

March 15, 2009 at 7:20 a.m. SarikArt

nez to qll thism qnd right noz every bit of info is great. taking note of it all!
thank you for all these great articals!

March 15, 2009 at 7:30 a.m. SarikArt

wow looks like I cant spell, my compu keeps on changing the key board on me. Sorry!
I said: New to all this and right now.....

April 3, 2009 at 11:36 a.m. Margarettedesigns4AG

Thank you for offering idea's to promote your store.

April 3, 2009 at 1:33 p.m. beadnykdesigns

very good information that I will definitely incorporate into my site!

April 14, 2009 at 1:06 p.m. PickleLilyDesign

Thank you!! This information is great and very helpful to a newbie :)

April 23, 2009 at 2:54 p.m. WORKSBYARIEGAW

THANK-YOU for this great info, i'm gona print this out for
future use.

May 18, 2009 at 10:59 p.m. DoubleLoveDesigns

Great info, especially for new sellers! THANKS!

June 13, 2009 at 9:47 a.m. VisualConcepts

Thank you. I have been searching for info on how to do this. I want to offer first time buyers 25% off their first purchase.

July 14, 2009 at 2:27 a.m. RaintreeAtelier

Great tips! As a newbie seller, I have difficulty gaining exposure. Hope this helps!

July 14, 2009 at 9:16 p.m. y0omii

Another very informative article. Thanks so much for the great advice :D

Aug. 13, 2009 at 10:25 p.m. temptingtrinket

I'm a new seller these are great tips--I'm trying to get people to my shop!

Sept. 2, 2009 at 10:41 a.m. EleanorsDesigns

Thanks for the information. I just reduced a lot of
my prices to what I consider the lowest I can go
without incurring a loss. There are incidental costs
that are hard to figure beside the costs that actually go
into making a particular item that many people forget to
consider.
Does it pay to have a few loss leaders?

Sept. 19, 2009 at 2:32 a.m. Stompz

HELP

If we can only list ITEMS FOR SALE, how do we list in a category FREE GIFT? And if we list free gift, are we charged for the listing? If someone clicks on it as a sale, do we get charged for the sale and then have to relist it?

HELP

Oct. 20, 2009 at 4:48 p.m. Vostrejs

If you want to offer discounts on items that maybe you have had a while or want to get rid of them fast, then fine. But offering discounts on items just because someone wants to buy two things just sends the message that your items were not worth the price they were listed at. No matter what I still spent the same amount of time working on the piece and the same materials, so why would the value of it go down when someone wants two of them.

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