Sellers, ever wonder what kind of discount you should give your buyers?  Should you take a percentage off or a dollar amount?  Should you give free items, or discounts of their next purchase?

Below you will find several ways to give buyers discounts, including the pros and cons of each.

BUYER DISCOUNTS EXPLAINED

1. Free Shipping

Is it actually free?  The answer is yes and no. 

• NO.  To offer free shipping some sellers will raise their price.  If the price of the item is already low or competitively priced, a higher price will cover the expenses associated with shipping.  This is the easiest pricing method.
• YES.  Other sellers will maintain their prices.  How can they do this?  Simple.  Set the minimum price you are willing to take for the item and then either add the cost of shipping to that price OR make sure that the cost of shipping will be covered in that amount and still leave you with a profitable product line.  By adding the cost of shipping into your minimum price you have to be sure NOT to go over your original price.  This is the trickiest pricing method.
• YES.  Other sellers will lower their prices.  How?  The retail/manufacturer/in store price of a product should be high enough that at your minimum price point, you will be able to lower your prices and cover the cost of shipping while maintaining a healthy business model.  You will receive a lower overall price, but will still come out ahead.  Why?  Because, your product line will most likely be of higher/better quality and your prices will be competitive.

2. Discount Shipping

• Free Shipping with purchase of X (2, 3, 4, etc items):  This is the most common method we have seen.  Does it work?  Only if your inventory is large enough for a buyer to want to purchase more than 1 item.  If you have 2 toddler shirts but you offer free shipping on 3 or more, you run the risk of either losing the second sale or the entire sale.  The buyer will most likely not try to find something else to purchase to get the Free Shipping deal.  You can make this a positive by offering at least 20 items per category/size/etc to draw your buyers into making those additional purchases.  Be aware that shipping charges must be figured out so that you do not lose your profit (and sometimes even more).  When this method is used and shipping charges have not been calculated to minimize loss, you can end up with a $50.00 sale and $75.00 shipping charge.  That's a loss of $25.00!  Always make sure the math works out before attempting to use this method.
• Each additional item is X ($5.00, $3.00, etc).  The method, depending on the price will keep the shipping costs per customer within a respectable amount on multiple purchases.  You can actually figure out down to the penny what it will cost to ship each additional item.  That would help save your customers additional money, which equals more repeat buyers.
• Each additional item is 25% off the cost of shipping listed:  This is the trickiest method because percentages are used to determine shipping charges.  This will more than likely result in large over charges in shipping multiple items or excess time calculating shipping charges.  For large, heavier orders it may result in a major profit loss if the shipping charges come out to be more than what is calculated.
• Each additional item is free.  Like Free Shipping, you must always make sure that the cost of shipping these items will not eat into your profit or draw you into a major loss of revenue.  This method is great to draw extra sales.  Buyers can easily calculate the shipping charges and will be more willing to purchase additional items from you.
• Each additional item is $5.00 off.  This method will also result in a large shipping charge for your buyers.  Unlike the "Each Additional Item is X" method, this method will leave different shipping amounts for each purchase.  For example:  If I purchase one wrist watch for $100.00 and the shipping charge is $15.00, then I purchase a ring for $500.00 and the shipping charge is $10.00 with $5.00 off each additional purchase I will have to pay $15.00 + ($10.00 - $5.00) = $15.00 + $5.00 = $20.00.  Actual shipping (including insurance and packing) may be $8.00.  That's an overcharge of $12.00!  Let's look at heavier items.  Let's say I buy a King size comforter for $199.00 and the shipping charge is $20.00, then I buy a King size mattress for $2000.00 and the shipping charge is $500.00, then I buy a King size Box Spring Mattress for $300.00 with a shipping charge of $350.00.  With $5.00 off my second & third (cheapest) purchases, I will pay $15.00 + $295.00 + $500.00 for a total of $810.00.  Actual shipping (as defined previously) may be $650.00.  That's an overcharge of $160.00.  This really adds up to a buyer.
• INTERNATIONAL:  As with all shipping discounts, be aware of international sales.  Free Shipping to international countries can add up.  Before offering free or discount shipping, make sure that you will not put yourself out of business by not adequating covering your shipping charges.  The positive in including shipping discounts for international buyers is that they also get to save.  The more they save on the shipping charges, the more they have to purchase additional items.  This creates a win win situation for you, the seller, and for your international buyers.

3. Discounts off next purchase

This is another popular discount method.  While it may work occasionally, the problem with this method is that you have to update your new listing regularly or add different kinds of products regularly.  While as buyer, I may like and purchase your Green Hot Topic T-Shirt when I return, I may not like any of the shirts you have for sale.  By offering other items, I may then purchase a necktie as a gift for a friend.  By not updating or adding different types of products it limits me as a buyer from purchasing additional items from you.  There are buyers who like to buy the same types of things, so offering additional items like the Green Hot Topic T-Shirt, say a Pink Hot Topic Camisole, will help to bring me back as a buyer to make additional purchases.

4. Free Items with purchase

This is a great method to use if you have light weight, category specific items.  If a buyer purchases a bedspread, you can include a matching pillow sham.  Or if a buyer purchases a dvd, you can include a poster that features the actor.  Including items that offer no value will just end up in the trash.  See our guide on "FREE Gifts with Purchase" to determine what kind of free gifts you should include in your packages.  The pros, cons, and what to avoid will be explained here: FREE GIFTS WITH PURCHASE.  Please note that the heavier the item is, the more you will have to spend on shipping.  Make sure that your free items are not taking away from your bottom line by bumping up the shipping costs.