Shopify Discount Strategies: When to Discount (And When Not To)

Discounts are a double-edged sword. Used strategically, they accelerate sales and clear inventory. Used carelessly, they train customers to never pay full price and erode your profit margins.

The key isn't whether to discount—it's when, how much, and for whom. This guide covers the strategic framework for discounting that protects profitability while still driving conversions.

How Discounts Impact Margins

Before running any discount, understand the math. A 20% discount doesn't just reduce revenue by 20%—it hits your margin much harder.

The Margin Math

If your product sells for $100 with a 40% margin ($40 profit), here's what happens with discounts:

Protecting Margins While Discounting

• Set minimum spend thresholds

  "15% off orders over $75" increases AOV to offset discount

• Limit usage per customer

  Prevent abuse and maintain value perception

• Exclude high-margin or new products

  Protect your best items from discounting

• Target specific customer segments

  First-time buyers, win-back campaigns, loyal customers only

• Set expiration dates

  Creates urgency and prevents indefinite discounting

Optimal Discount Percentages

Not all discounts are created equal. Here's when to use each level:

First-Time Buyer Discounts

10-15% for first purchases is standard. Higher discounts may attract bargain hunters who never return. Consider offering store credit for repeat purchases instead of deep first-order discounts.

Abandonment Recovery

Start your cart recovery sequence without discounts. Only offer 10% in your final email to customers who haven't converted—this avoids training everyone to abandon carts for discounts.

Types of Discounts

Percentage vs. Flat Amount

Rule of 100: If price is under $100, use dollar amounts. Over $100, use percentages. Whichever number is bigger feels like a better deal^[1].

Other Discount Types

• Free shipping threshold

  "Free shipping on orders over $50"—increases AOV without product discounts

• Buy X Get Y

  "Buy 2, get 1 free"—moves inventory while feeling generous

• Tiered discounts

  "10% off $50, 15% off $75, 20% off $100"—rewards bigger orders

• Bundle discounts

  "Save 20% when you buy the set"—see our bundling guide

• Automatic discounts

  Applied at checkout without codes—higher uptake rates

For bundle strategies, see our complete Shopify bundling guide.

Psychology of Discounts

FOMO (Fear of Missing Out)

Time-limited offers trigger urgency. Flash sales (24-48 hours) with countdown timers consistently outperform open-ended discounts.

• "24 hours only: 20% off everything"
• "Ends at midnight tonight"
• "Only 3 left at this price"

Anchoring

Always show the original price struck through next to the sale price. The "anchor" makes the discount feel more valuable, even if customers never intended to pay full price.

Personalization

Personalized discounts (birthday offers, behavior-based) feel like exclusive rewards rather than generic sales. They drive 50%+ higher engagement than broadcast discounts^[2].

Loss Aversion

People hate losing more than they like gaining. Frame discounts as "Don't miss your $20 savings" rather than "Get $20 off." Expiring discounts leverage this powerfully.

When NOT to Discount

Sometimes the best discount strategy is no discount. Here's when to hold the line:

Signs You're Over-Discounting

• Customers only buy during sales

  You've trained them to wait for discounts

• Full-price conversion rate is dropping

  Price anchoring is working against you

• Margins are shrinking faster than volume is growing

  The math isn't working

• Discount codes are everywhere online

  You've lost control of your pricing

Discount Alternatives

Want to drive sales without cutting prices? Try these alternatives:

• Free gift with purchase

  Add value instead of cutting price. "Free tote bag with orders over $75"

• Loyalty points multipliers

  "Double points this weekend"—drives purchases without margin loss

• Free shipping thresholds

  Increases AOV without product discounts

• Early access

  "VIP early access to new arrivals"—exclusivity without discounts

• Bundle at full value

  "Get the complete set" positioned as convenience, not savings

• Extended warranty or service

  Add value to premium purchases

Post-Purchase Value-Adds

Instead of discounting the initial sale, add value after purchase. Post-purchase SMS can offer exclusive add-ons, early access to restocks, or complementary products at full price. Learn more about post-purchase SMS strategies.

Conclusion

Strategic discounting means knowing when to use discounts, how much to offer, and—critically—when not to discount at all. The 10-20% range works for most promotions, but always calculate the volume increase you need to maintain profitability.

Protect your margins with minimum spend thresholds, customer targeting, and expiration dates. And before defaulting to discounts, consider alternatives like free gifts, loyalty multipliers, or strategic bundling.

The best discounting strategy is one you don't need to use constantly. Build enough value that customers want to buy at full price—and save discounts for strategic moments that accelerate growth without sacrificing long-term brand equity.