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As the holiday shopping season begins, e-commerce sellers in the U.S. are seeing a rebound after a challenging September. Early October data has already shown a 3% increase in online sales compared to the same time last year, largely driven by discount promotions.

Consumers, always mindful of inflation, are seeking out deals to make their holiday purchases more affordable, presenting a clear opportunity for sellers to capture sales early in the season.

Marketers spend a lot of time trying to connect the dots between shoppers and sales. This post focuses on the psychology behind pricing, as well as strategies that you can use to put these theories to work in the real (e-commerce) world. 

Brand entrepreneurs need to find an advantage over their competitors. Pricing strategy – and understanding the psychology behind it – is a great way of doing just that. 

Understanding the Psychology Behind Pricing

As the holiday shopping season kicks off, discounts become a powerful tool for driving sales across Amazon, Walmart, and TikTok Shop. However, optimizing these price reductions requires understanding how consumers perceive and respond to different pricing structures, influenced by behavioral economics principles.

Key Price Types and Strategies

This next section focuses on buyer behavior. Ultimately, that’s what’s behind the decision to go ahead with a purchase decision, instead of abandoning – often forever – an item in an e-commerce cart. 

To start, let’s take a closer look at how sellers and shoppers might think about pricing and introduce the terms, “reference price,” “reservation price,” and “asking price.” 

Reference Price – That’s the baseline price consumers expect, shaped by past experiences and comparisons. To positively influence this, sellers can show original prices, place premium-priced products alongside discounted items, and create pricing that highlights a perceived deal.

Reservation Price – This represents the maximum price a customer is willing to pay, often shaped by personal value perception. Brands can enhance perceived value by emphasizing product quality, showcasing unique benefits, and using scarcity tactics like limited-time offers to increase perceived urgency.

Asking Price – Finally we have the listed price, over which sellers have the most control. Effective pricing maintains perceived product quality while avoiding a “discount-only” brand association. Here you’ll want to use thoughtful positioning to retain a strong brand perception.

Discount-Driven Growth is Moving the Needle 

One of the key drivers behind this resurgence is the strategic use of discounts. As reported by ECDB, in the first half of October, promotional discount usage increased by 22% compared to 2023. For brand entrepreneurs, leveraging discounts early on can be a pivotal strategy that helps attract budget-conscious customers. As households tighten their spending, offering meaningful discounts can be the tipping point to convert hesitant shoppers into buyers.

According to a report by Inmar Intelligence, 93% of U.S. consumers consider “discounts and offers” critical in their purchasing decisions. Furthermore, 80% of consumers reported that a discount coupon influenced their shopping habits. 

Additionally:

• 37% made a purchase sooner than planned
• 35% chose a brand they hadn’t previously considered
• 35% bought more than they initially intended

For retailers, coupons and discounts remain proven strategies for drawing in new customers, increasing sales, and moving inventory. For consumers, they’re an appealing way to save money, feel valued, and discover new brands and products.

How Pricing Strategy Affects Conversion Rates 

The impact of discounts on conversion rates is hard to overlook. ECDB’s data reveals that for every 1% increase in discounts, the Add-to-Cart Rate (ATCR) climbs by 0.083%. Furthermore, a 10% discount at checkout can lead to a 0.831% increase in ATCR. 

These incremental changes can significantly influence buyer behavior, prompting more shoppers to finalize their purchases. By implementing smart discounting strategies, sellers can improve conversion rates and see a positive impact on sales.

Discounts Can Help You Meet Your Business Goals 

To make the most of discounting and meet your business objectives, consider these four targeted promotion strategies to drive growth and enhance customer loyalty.

Attract New Customers

Run flash sales to create urgency and drive new customers to your store. Temporarily reducing prices encourages impulse buys and attracts shoppers who may not have considered your brand. Set up limited-time discounts across select stores, defining specific conditions (e.g., spending thresholds or multi-day offers) to maximize appeal.

Reward Loyal Shoppers

Retain repeat customers by offering loyalty rewards like coupons and vouchers. Research shows repeat customers are nine times more likely to return and spend more per visit. Targeted discounts, such as a 10% code for abandoned carts, can effectively re-engage customers. Set up custom discounts that automatically apply when loyalty points or other conditions are met.

Boost Sales for Specific Niches

Use mix-and-match deals to move seasonal or perishable items quickly. Bundling products at a discount (e.g., “3 for 2” offers) boosts sales volume and gives customers a sense of value. Set up mix-and-match offers across product categories to efficiently achieve your sales goals. Amazon virtual bundles are a perfect way to capitalize on this approach. 

Cut Down on Storage Fees

Multibuys help clear inventory by encouraging bulk purchases with tiered discounts. This approach reduces deadstock and increases sales. Set discounts to apply based on the quantity sold, with prices automatically adjusted (e.g., per-unit discounts with higher quantities). This strategy helps turn over stock effectively and improves profitability.

Global E-Commerce Insights

As has become the trend, the U.S. takes a back seat to China. While U.S. sellers are seeing early gains, China’s e-commerce sector continues to surge ahead. In September 2024, China experienced a 26% growth in online sales, bringing its projected e-commerce revenue for the year to $2.02 trillion—almost double the U.S. forecast of $1.06 trillion. 

Although October is showing promise, 2024 has been a volatile year for U.S. e-commerce. After a promising start with a 9% increase in March, sales dipped 4% in August and 7.2% in September, largely due to economic uncertainty and inflation. 

This discrepancy is partly due to differences in shopping habits and the timing of retail events. While U.S. shoppers focus on Black Friday and Cyber Monday, Chinese consumers drive massive sales during Singles’ Day on November 11, which generated $84 billion in 2022, that’s almost 10 times the $9 billion spent on Black Friday in the U.S.

Takeaways for Brand Entrepreneurs

Despite a rocky year, U.S. e-commerce is showing resilience as the holiday season approaches. For brand entrepreneurs, focusing on aggressive discount strategies to meet the needs of budget-conscious shoppers can help boost sales during this crucial time. 

An early October boost, fueled by aggressive discounting, suggests that online sellers can expect a strong holiday season if they focus on value-driven promotions, especially with major events like Black Friday and Cyber Monday approaching.

While the U.S. may trail behind China in terms of total revenue, there is still plenty of time to capitalize on the growing demand for holiday deals. By tapping into the right strategies, Amazon, Walmart, and TikTok Shop sellers can position themselves to make the most of the 2024 holiday season and finish the year strong.

How Canopy Management Can Help

What would adding 67% more organic sales mean for your brand?

Turns out that when you combine the massive experience of Canopy’s Marketing Experts with smart tools and tech, you get industry-leading results like this:

• 84% Average Year-Over-Year Profit Growth for Our Partners
• 2.7 Billion in Revenue Managed
• 99.1% Partner Retention Rate

Canopy Management is a full-service marketing agency for Amazon, Walmart, and TikTok sellers. Our team consists of multi-million dollar, omni-channel entrepreneurs, industry leaders, and award-winning experts. 

To level up your own online-selling journey, check back here to stay in touch with the latest e-commerce news, as well as tips and strategies from some of the brightest minds in the Amazon, Walmart, and TikTok Shop marketplaces.