The Art of Dynamic Discounting – Conversational Commerce Strategy

The Art of Dynamic Discounting – Conversational Commerce Strategy

Discounting is without a doubt the most effective tool used by retailers both offline and online to drive demand and increase sales.

Come Black Friday and half of your email subject lines will have the word “Discount”.

We all love discounts, don’t we?

We also love a personalized experience because it makes us feel special and valued.

However, the discounting strategies used by most retailers today still follow the old playbooks that push one-size-fits-all promotions to their customers.

Such traditional discounting techniques do not align well with the one-to-one customer personalization strategies of retailers in today’s post-COVID markets.

Besides lacking personalization, they are inefficient, reduce profit margins, and are even susceptible to fraud.

Enter Dynamic Discounting, wherein retailers set a different discount for each customer depending on a host of factors.

If you have ever booked an airline ticket, you may have got a taste of this innovative treatment.

The art of dynamic discounting was popularized by the airline industry and is now being practiced by most top retailers across markets.

Benefits of Dynamic Discounting for Online Retailers

  • Saves you from over discounting. It is ok to give a hefty discount but not to every customer. Some customers who already trust your brand do not need a discounting push to buy your products. By leveraging your customer data, you can make intelligent decisions on who should be given a discount and who should not. Ultimately, this helps you achieve higher profits from the same number of sales.
  • Optimized inventory turnover for retailers dealing with soon-to-expire items. Rather than setting up a lower price tag near the expiry date, they can gradually reduce the price based on customers’ willingness to pay. This type of tiered pricing allows customers to choose between a longer expiry date and a total price versus a lower price for using an item close to the expiry date.
  • Better handling of demand fluctuations The demand for a product can vary greatly depending on the time of purchase – time of the day, the week, the month, or the year. For example, Christmas gifts are in massive demand in December.

With the help of dynamic discounting, retailers can offer high-demand products at much lower prices in the off-season. Many customers are willing to buy something early even if they do not need it for a while in the hope of getting it at a lower price.

  • Personalized customer experience and increased brand loyalty The most successful retailers build a strong relationship with their customers. This involves knowing more about them, their preferences, and speaking directly to them. If a local grocery store offers extra discounts to its repeating customers, why should you give the same discount to everyone?

Making dynamic discounting a core part of your customer personalization strategy builds a stronger bond and instills brand loyalty.

8 Examples of Brands Maximizing Their Promotional Dollars With Dynamic Discounting

Below, we will highlight some interesting examples of online retailers using dynamic discounting techniques to create personalized pricing experiences for their customers, increase sales, and drive brand loyalty.

Lufthansa Airlines Moves to a “Continuous Pricing Model”

We will start this list with the example of an airline using data science to power its dynamic pricing strategy calling it the continuous pricing model.

As Simon Rimrod, Head of Revenue Management Pricing at Lufthansa Group, explains, the primary logic behind their continuous pricing model is to make a price point available to a certain segment of customers as they find justifiable. In this interview, he says that continuous pricing is something that the company needs for the long term besides serving useful to deal with the COVID-19 pandemic.

Uber Makes Dynamic Fares a Standard in App-based Taxi Services

Uber’s dynamic pricing strategy has arguably been a critical driver of its success.

Uber uses a proprietary dynamic pricing algorithm that adjusts the fares based on several factors like route length, time of booking, traffic, and rider to driver demand.

This way, Uber can offer a very cheap commute for a particular trip and steeper fares during peak demand. You can learn more about how Uber’s dynamic pricing works here.

Amazon Nails Dynamic Discounting for a Dynamic Market

Amazon uses dynamic pricing to its advantage by adjusting product prices at the same rapid pace as changing market demand. They use customer data and advance data science technologies, and Machine Learning like no other retailer out there. Their advanced algorithms can analyze data, see patterns, and develop real-time discounts that customers can’t say no to. This coupled with their product recommendation engine, maximizes average car value.

Airbnb’s “Smart Pricing” Feature Allows Host to Get More Out of Their Properties

Airbnb offers an intelligent pricing feature to its hosts that can automatically adjust the listing prices based on several variables like rental type, season, demand, and location when turned on. Hosts control the minimum and maximum prices that the listing can fluctuate in between. Many hosts have benefitted from this dynamic pricing feature and increased their net revenues.

If a host is not happy with the results, they can always turn off the feature.

Birchbox Uses Discounts as an Incentive to Recover Cart Abandoners

Birchbox, a New York-based monthly cosmetics subscription provider, heavily uses cart abandonment- discount offer emails to convert lost customer visits. It is vital to use discounting with care as customers may start anticipating it and intentionally not convert on their website visits.

H&M Rewards Loyal Customers With Discount Codes

H&M runs a reward program for its Club members wherein they offer personalized discount offers to their customers based on their purchase history. The discount codes come up with an expiration date to nudge users into taking action. The value of a discount depends on the number of reward points earned. Savings Engine Drops Prices as You Shop key differentiator and one of the reasons why Walmart acquired it is its real-time savings engine that lowers product prices as customers buy more items. Through this unique dynamic discounting feature, they are able to get customers to build bigger carts to pay less. Others offer discounts if a customer opts out of free returns or makes a payment with a debit card instead of credit.

Mariott Will Offer More Deals In Off-Season

Mariott Hotels is making significant changes in how its Bonvoy loyalty members pay with points for award nights. Starting September 2019, they have introduced a dynamic pricing model that sets prices as a demand function. In off-peak season, Bonvoy users will be able to receive more discounts on properties they’re looking at. Mariott’s move is aligned with the global travel industry trend of building dynamic discounting right in their loyalty programs.

Embrace Dynamic Discounting In This Dynamic Market

The examples shared above make it very clear that the concept of dynamic discounting and pricing is here to stay and only going to become more sophisticated and pervasive across markets.

The question is whether you, as an online retailer, are willing to make it a part of your discounting strategy or not?

The one-size-fits-all approach to pricing and discounting is going to provide suboptimal results and may even hurt your brand.

While we understand that implementing dynamic discounting can feel daunting, we also believe that it has never been easier.

With significant advances in machine learning, AI, and data science, the technology and systems needed to set up dynamic discounting are more accessible than ever.

At, we have enabled brands like Unilever, Disney, Samsung, Loreal, and many more to offer personalized conversational commerce experiences across social, messaging, and web.

Enabling dynamic discounts across various conversational touchpoints like WhatsApp, Facebook Messenger, iMessage, SMS, Twitter and many more is a key capability of our enterprise-grade shopper engagement platform.

Your willingness and our capabilities to implement a technology-powered dynamic discounting strategy if combined together will become a key driver of your growth and success.

We are happy to show you how. Just book your personalized demo here.

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