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Hi there! 👋

Ever thought about the deals you're offering to lure in customers who would've bought your products anyway?

Many of us are guilty of offering discounts or promotions at the first hello. But what if I told you there's a way to save on those costs without losing customers?

In today’s issue, we’re going to talk about hidden costs, how they are the silent killer of your business, and how to fix it.

If you gain insights into hidden costs, you’re able to get a grip on your expenses and make more profit in the end.

Unfortunately, there are a few problems with these costs:

• They don’t show up on your P&L.

• You’re not really sure where they come from.

• Therefore, they seem hard to understand and to fix.

Unfortunately, hidden costs are not a focus area for most e-commerce managers. Let’s change that.

Set up a smarter strategy that’ll boost your bottom line without cutting your prices.

Here's how you can transform your approach in 4 steps:

1. Recognize the Hidden Cost

You need to understand that the margin given away through discounts to attract buyers, who would have purchased anyway, is a cost not visible on your financial statements.

You need to analyze your sales data and promotions to understand how discounts impact profitability. Specifically, compare periods with and without promotions to see if there's a significant increase in sales volume that justifies the margin loss.

Additionally, segment your customer data to identify those who purchase with and without discounts. This helps in understanding the buying behavior and intent to purchase at full price.

2. Evaluate your Discount Strategy

Review all discount codes you have offered in the past 12 months.

You need to analyze which discounts are genuinely attracting new customers versus rewarding those ready to buy at full price.

This involves segmenting customer data to understand different responses to discounts and tracking the sales lifecycle to identify patterns where discounts may not be necessary.

Also, this is a game of testing. Why not try a 5% discount instead of 20% ? Most of the time, it isn’t the amount of discount you give that matters.

The human brain is already nudged by any incentive you give them. So test how low you can go.

The lower the discount, the more profit you’ll have.

3. Innovate your Strategy

There are so many ways to trigger your customers besides just giving discount.

Think about:

• Weekly giveaways

• Kick-backs (which only 30% are recuperated)

• Gifts-with-Purchases (that you’ll let your supplier pay for)

There is no perfect generic strategy. It depends on your business, your industry and your customers.

You need to test, validate, iterate and test again.

It is safe to say that plainly giving away discount is the easiest way to trigger new customers. It is also the easiest way to cut your profits.

4. Smart Popup Placement

We need to address Popups seperately.

I have kind of a love/hate relationship with them.

Most of the time, they’re ugly as hell, but they can truly work. If done properly.

Try and shift to a timed or exit popup strategy. This way, you give those ready-to-buy customers a chance to make a purchase at full price before being tempted with discounts.

A few dos and don’ts to get popups right.

Dos:

• Time them right: give users time to engage and don’t bombard them a popup after 1 millisecond on your site.

• Make them relevant: the offer should match the user’s interest

• Easy closure: please don’t make it impossible to close them with a tiny button

• Optimize for mobile: screen real estate on mobile is limited. Don’t fill up your screen with a huge popup.

Don’ts:

• All of the above, but then the opposite.

Analyzing and understanding hidden costs and optimizing strategy based on them can have a huge impact on your bottom line profits.

This is not an easy process. But I’ll guarantee you that it is a new & often overlooked way of increasing profitability.

That’s it for today. Have a great Sunday.

Erik

Whenever you’re ready, there are three ways I can help you.

1. Interim E-Commerce Management: I run, scale & optimize your e-commerce business.

2. Resource Library. Useful resources for every marketer. Includes an E-Commerce Audit Report, ChatGPT Prompt Guide & Midjourney Masterclass.

3. Book a 1:1 Call. A No Bullshit 20 min Ask Me Anything call. If you’re facing challenges in online business, I’m happy to talk.

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