The choice of the appropriate discount is a balancing act with high stakes. On the one hand, you want to offer something enticing enough to boost sales and attract new customers. On the other hand, you don’t want to give away the farm and watch your profits disappear. So, the secret? The trick to determining the best discount percentage is not to choose the largest number, but to know the psychology of the sale.
Some discounts generate buzz, and some fail. The difference often comes down to how a deal makes a customer feel. We’re going to break down why certain percentages work better than others and help you find the sweet spot for your store.
The Psychology of a Good Deal: Why Some Discounts Just Feel Better
Ever noticed how a 20% discount just feels more exciting than a flat $20 off, even on the same item? That’s not a coincidence. It’s psychology at work.
More Than a Number: How Discounts Trigger a "Happy" Response
Here’s a fun fact: receiving a discount can actually make shoppers happier. The process of making a deal leads to the release of oxytocin, a hormone that leads to positive emotions. This is not only a nice shopping experience, but it also reduces the chances of customers leaving their carts.
This emotional value will give value to your products. Customers feel that they are getting more value out of their money, and the purchase is not only smart but also satisfying.
Read more: Psychology of discounts
The Rule of 100: A Guide to Percentage vs. Dollar Off
When you’re deciding between offering a percentage-off or a dollar-off discount, there's a simple guideline called the "Rule of 100" that can help.
- For products under $100, A percentage-based discount usually feels larger. For example, 25% off a $20 shirt sounds more impressive than $5 off.
- For products over $100, A fixed-dollar discount tends to seem more significant. A $500 discount on a $2,000 laptop is more eye-catching than 25% off.
Read more: Fixed Amount or Percentage discount?
Anchoring & Framing: Why Presentation Is Everything
How you present a discount matters just as much as the discount itself. This is due to a psychological principle called anchoring. When a customer sees the original price, their brain "anchors" to that higher number. A percentage off is then perceived as a big discount off that anchor point, and the deal will seem bigger.
To illustrate, a 20 percent discount on a $200 product highlights the percentage of savings over the total price, which can be more psychologically effective than saying that the savings are 40 dollars, even though the savings are the same.
Read more: Psychology pricing and discount strategies
A Review of Common Discount Percentages and Their Impact on Conversions
Now for the big question: what is the best discount percentage? While every business is different, research and data give us some solid clues about how customers react to different numbers.
5-10% Off: A Gentle Nudge or Too Small to Matter?
People generally consider a 5% or 10% discount small. So it might not be big enough to attract a considerable amount of price-sensitive shoppers.
But to your regular customers who already adore your brand, a slight discount can be the little push they require to buy something they were already thinking of buying. So, a10% off is a good deal? For the right person, absolutely.
15% Off: The Surprise Conversion King?
You might think bigger is always better, but one study found that a 15% discount actually drove the most conversions compared to a control group.
Why? Because it’s the ideal middle ground. It’s substantial enough to motivate loyal shoppers but not so large that it primarily attracts "window shoppers" who are only there for a steep deal and will likely never return to buy at full price.
20-30% Off: What Is a Good Discount Percentage for Engagement?
The 20-30 percent discounts are great when it comes to stimulating participation. To most shoppers, a 20 percent discount is the lowest amount that can make an offer to be considered as something special. It is a fair compromise, which means a good deal without being too generous to the extent of losing your profits too soon.
So, is 20% off a good deal? In most cases, it’s a very effective and popular choice.
33% Off: A Balanced Approach for Digital Products
For sellers of digital products, where profit margins are often higher, 33% has emerged as another discount "sweet spot". It’s a tempting offer that feels more generous than 20% but isn't as extreme as 50%, allowing sellers to offer a great deal without calling the product's underlying value into question.
50%+ Discount: High-Reward, High-Risk
A 50 percent discount is one of the most popular promotional offers. It is attention-grabbing and can be quite effective, especially when it is a digital product or when there is a major sale, like Black Friday.
But be careful. Offering such a steep discount can be risky for a few reasons:
- Profit Squeeze: With typical eCommerce net profits between 5-20%, a 50% discount can quickly erase your margin.
- Wrong Crowd: It tends to attract one-time bargain hunters, not long-term loyal customers.
- Devalued Perception: If a product is constantly 75% off, customers may start to believe it was never worth its original price to begin with.
Interestingly, one analysis found that while email open rates climb with the discount percentage, the click rate can actually drop when discounts get too high. This suggests a big number might get people to look, but it doesn't always get them to act.
How to Find the Best Discount Percentage for Your Business
Finding the best discount percentage isn’t a one-size-fits-all formula. The correct quantity of a luxury brand will not be the same as a shop selling off last year's t-shirts. This is how you can determine the ideal number for your store.
Step 1: Define Your Goal
First, what are you trying to accomplish? Your goal will shape your entire strategy.
- Customer Acquisition: A nice first-time customer discount will give new customers the confidence to try your brand.
- Encourage Bigger Sales (and higher AOV): Promotions such as spend 100, get 20 off are excellent to get people to add more to their cart to get a better deal.
- Customer Retention: Offering special offers to your best customers will make them feel special and valued, and they will come back to shop with you again.
- Clearing Inventory: Looking to get rid of old stock? You can give a higher percentage discount or a Buy One, Get One (BOGO) deal to create space to introduce new products.
Step 2: Analyze Your Product and Profit Margins
This step is critical. Before you offer any discount, you need to know your numbers. As one study noted, e-commerce net profits are often only between 5-20%. If your margins are thin, a 50% discount isn’t a promotion; it’s a problem.
Consider your product type:
- Luxury or High-Demand Items: These are the items that do not have to be sold at a low price. A small, exclusive offer can be more effective.
- Commoditized Products: In a competitive market, a larger discount might be necessary to stand out.
- Digital Products: These are very profitable, and you can afford to be more liberal with the discounts without making losses.
Step 3: Understand Your Customer
Discounts do not have the same influence on every customer. Understanding your audience will help you make offers that will be most effective.
- Price-Sensitive Shoppers: Customers who have a low budget or are younger customers are more interested in bigger discounts.
- Wealthy or Loyal Customers: These buyers likely respond better to smaller, exclusive discounts that acknowledge their loyalty rather than just a generic, steep price cut.
Step 4: Consider the Timing and Market Conditions
A discount can be very successful or not, depending on the season.
- Peak Season (e.g., Black Friday): The greater the discount, the more customers will be attracted.
- Off-Peak Times: Smaller discounts are a simple nudge to your current customers who do not consume too much of your profits.
Read more: Choosing correct discount levels
Step 5: Understand Buyer Propensity: Don't Discount for Everyone
Here’s a more advanced tip: the most effective discounts are given to the right person at the right time. Consider how likely a customer is to make a purchase.
- If a user is already likely to buy, offering a discount is just giving away profit.
- If a user is very unlikely to buy, a discount probably won’t be enough to change their mind.
- If a user is "on the fence" (about 60-80% likely to buy), a discount is the perfect tool to nudge them toward checkout.
Practical Strategies for Using Effective Discount Percentages
Once you have a target percentage in mind, you can get creative with how you offer it. Here are a few proven strategies.
Read more: Discount Pricing Strategies
Tiered & Volume Discounts: Encouraging Customers to Spend More
This strategy rewards customers for buying more. For example, luxury bedding brand Boll & Branch offers new customers a discount, but only if they spend $150 or more. This encourages a higher average order value (AOV).
Flash Sales & Limited-Time Offers: Creating Real Urgency
Flash sales use the principle of fear of missing out (FOMO) to drive a huge number of sales in a short period. Eyewear brand Blenders, for example, used flash sales on Black Friday and Cyber Monday to achieve 10x sales, scheduling their promotions to go live automatically at midnight.
BOGO & Free Gifts: Increasing Perceived Value
Sometimes, the most appealing discount isn’t a percentage at all.
- BOGO (Buy One, Get One): This classic offer is a top performer and can be used creatively, like Hygge Gear’s "Buy 1, Get 4" deal on headbands.
- Free Gift with Purchase: A small, unexpected gift can be a cost-effective way to earn loyalty. The apparel brand INTO THE AM does this by offering a free, relevant gift to shoppers who add specific items to their cart.
Automatic Discounts vs. Discount Codes: Which Should You Use?
How a customer receives their discount matters.
- Discount Codes: They are excellent to make a customer feel special and to attract a specific kind of customer. The downside? They add an extra step at checkout, which can sometimes cause shoppers to abandon their carts.
- Automatic Discounts: This is much more convenient, especially for mobile customers. The discount is applied to the customer automatically, reducing friction and making the checkout process easier.
Read more: Fixed Amount or Percentage discount?
Personalized Offers: Make Customers Feel Special
Using customer data to create personalized offers can lead to huge returns. For example, the personal care brand Spongellé created a "shop quiz" to learn about customer preferences. After the quiz, users received personalized product recommendations along with a discount code. The result? The quiz now accounts for over 25% of the brand’s revenue.
Case Studies: How Real Brands Use Optimal Discount Percentages
Theory is great, but let's look at how this plays out in the real world.
The Cautionary Tale: How Aggressive Discounting Can Backfire
Groupon is a perfect example of discounting gone wrong. As Wharton professor Eric Clemons noted, the platform’s deep, untargeted discounts often attracted the wrong kind of customer.
Shops were driven into bankruptcy because they sold thousands of items below cost to customers who would never return for a full-price purchase. One study confirmed this, finding that only about 20% of deal users ever came back to buy again at full price. It's a powerful reminder that more sales don't always mean more profit.
The Smart Approach: How Top Brands Find Their Perfect Number
In contrast, brands that use discounts strategically see great success. Brands like Blenders and Boll & Branch don't just throw discounts out randomly. They use them to achieve a certain objective, like the establishment of a sense of urgency with a flash sale or the maximization of AOV with a spending limit. They are aimed at the right customers at the right time, and it shows that a smart, focused discount is much more effective than a huge, sitewide sale.
How to Implement Your Discount Strategies on Shopify
Such concepts may be difficult to implement, particularly the more advanced ones, such as tiered pricing or automatic volume discounts. Although Shopify has discount functionality, it is not enough to run multiple campaigns and make sure that the correct rules are applied automatically.
This is where special apps come in. There are tools that are designed to deal with such situations that are available to Shopify store owners. It takes a few clicks to create Buy 2, Get 10% Off or Spend 100, Get 20% Off campaigns and customize the sales badges, discount logic, and so on. To get specific guidelines, the help desks of applications such as Discounty offer step-by-step guidelines and video tutorials to guide you through the whole process of installation.
Final Words
Finally, the best percentage of discount is not a figure but a plan. It is about understanding the psychology of your customers, understanding your profit margins as well as the back of your hand, and being very clear on what you want to accomplish.
It should be, What is the best discount to my business, to this product, and to this customer? as opposed to, What is the best discount? By shifting the guesswork to a strategic one, you will be capable of developing promotions that will not only increase your sales but also develop a stronger and more profitable brand in the long term.
FAQ
What discount percentage is most effective?
There is no single magic number. However, data suggests a few key ranges:
- 15% has been shown to be highly effective for driving conversions from loyal customers.
- 20% is often seen as the minimum for a discount to feel substantial and grab attention.
- 20% - 50% are popular "sweet spots," especially for digital goods or during big sales events.
Is a 20% discount too much?
Generally, no. A 20% discount is often a great choice. It's significant enough to motivate customers but usually manageable for most businesses. It is simply too much when you have thin profit margins. Remember to always do the math first!
What is the most effective discount percentage for a first-time buyer?
A discount of 15-20 percent can be a good idea when it comes to first-time buyers. It is strong enough to make that initial purchase and leave a good impression, but it does not create an anticipation of huge, long-term sales. The goal is to win them over, not just win the sale.
