How to Use Discounts Wisely Without Hurting Your Revenue

Discounts and promotions are staples of B2C marketing, often used to attract new customers, boost sales, or retain existing ones. While they can be effective, overusing them—or offering them to the wrong users—can harm your profitability and train customers to wait for deals, eroding long-term revenue. The key to leveraging discounts successfully is knowing when and to whom they should be offered.

Here’s how to make discounts work smarter for your business without sacrificing your bottom line.

The Challenge: Giving Discounts to the Right People

One of the biggest hurdles businesses face is identifying which users truly need a discount to stay engaged and which ones don’t. Blanket discounts, or offers based on generic triggers, can do more harm than good. Offering discounts to users who were already planning to make a purchase, or who don’t find long-term value in your product, leads to wasted resources and diluted revenue.

Examples of Misaligned Discounting Strategies:

• Paramount+: Offering users three free months when they attempt to cancel a subscription. While this may retain some customers, it also rewards users who might have stayed anyway if they had been reminded of the platform’s unique value. Worse, it can encourage “discount gaming,” where customers cancel repeatedly to secure free months.

• Tinder: Providing discounts to users about to let their subscriptions expire. While this may drive renewals, it often rewards users who didn’t need the discount to stay and prolongs subscriptions for those who aren’t genuinely engaged.

• DoorDash: Sending discount codes to users who abandon their carts. While this tactic can recover orders, it also teaches users to wait for discounts rather than completing purchases at full price.

These reactive strategies may boost short-term numbers, but they often fail to address the root cause of disengagement. Worse, they can erode perceived value and condition users to expect incentives as a prerequisite for continued use.

The Problem with Reactive Discounting

Most companies fall into the trap of offering discounts as a last-ditch effort to prevent churn. This reactive approach may appear to work—after all, some users stay—but it comes at a significant cost. Discounts are often provided to users who don’t need them or are already disengaged, meaning they’re unlikely to derive lasting value from the product.

The result? Inflated retention metrics that mask deeper issues and a hit to profitability that could have been avoided with a more proactive strategy.

A Smarter Approach: Proactive User Segmentation

The solution to effective discounting lies in proactive user segmentation. By analyzing user behavior, you can identify patterns and predict which users are at risk of churning or need extra incentives to stay engaged. Instead of offering discounts to everyone, focus on tailoring your approach based on user needs and preferences.

Examples of Smarter Discounting:

• Frequent but Disengaged Users: These users might benefit from a discount if they show signs of slipping, but only after attempts to re-engage them with reminders of the product’s value.

• Occasional Users: Instead of a discount, consider offering personalized content, like a tutorial or a feature spotlight, to rekindle interest.

• Cart Abandoners: Before sending a discount code, try a reminder email that highlights product benefits or offers other benefits.

This nuanced approach ensures discounts are used as a strategic tool, not a crutch, maximizing their effectiveness while preserving profitability.

How Coho AI Can Help You Execute Smarter Discounting

Coho AI takes the guesswork out of discounting by empowering companies with advanced user segmentation and real-time analytics. Here’s how Coho AI makes implementing smarter discount strategies fast and effortless:

• Intelligent Segmentation: Coho AI automatically groups users based on behavioral data, helping you identify those who truly need a discount to stay engaged. You can avoid giving discounts to users who would have purchased or stayed anyway.

• Personalized Recommendations: The platform provides actionable insights on the best way to engage different user segments—whether through discounts, personalized content, or feature highlights.

• Real-Time Adaptability: Coho AI’s real-time analytics ensure you’re responding to user behavior as it happens. For example, if a user shows signs of churn, Coho AI can recommend the right incentive at the optimal time.

• Effortless Implementation: With minimal engineering effort, Coho AI integrates seamlessly into your existing marketing stack, allowing you to implement targeted strategies without delays.

By using Coho AI, you can save money, boost engagement, and maintain a healthy balance between discounts and profitability.

Conclusion: Make Discounts Work for You

Discounts are a powerful tool in B2C marketing, but only when used wisely. The key is targeting the right users with the right incentives at the right time. Instead of waiting until users are about to leave, adopt a proactive strategy with intelligent segmentation and real-time insights.

With Coho AI, you can take control of your discounting strategy, ensuring every offer serves a purpose and delivers maximum value to both your customers and your business. Ready to optimize your discount strategy? Get your free Initial Growth Analysis and discover how Coho AI can help you grow smarter, not just bigger.