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.