Been wrestling with this for months now. Our conversion rates are decent but could be better.
Every time we consider deep discounts, half the team says it’ll cheapen our product. The other half points to competitors doing 40-50% off regularly.
How do you decide when discounting makes sense versus when it actually damages long-term value?
Only discount when you need data or volume fast.
Check your acquisition costs against lifetime value first. Don’t consider discounting until you know these numbers. If you’re acquiring customers profitably at full price, discounts just throw money away. When your CAC is too high and you need volume, targeted discounts can help. I run discounts only when I’ve got a specific goal: testing new markets, seasonal pushes, or converting trial users to paid. Never use them as a panic move when conversions tank.
Start with a small test. I did a 30/70 split once - most users saw full price, 30% got the discount. Tracked immediate conversions plus what happened to those discounted users over 6 months.
The discount people had terrible lifetime value. They churned fast and barely upgraded. The conversion boost got crushed by lower long-term revenue.
Now I only discount for testing new audiences or clearing inventory. For normal acquisition, I’d rather fix the product or messaging than teach people to wait for sales.
Check your cohorts first. If full-price customers stick around and upgrade, don’t mess with that pricing. If you’re already bleeding users everywhere, discounts won’t solve the real issue. I only use discounts for two things: nudging engaged trial users who didn’t convert and testing how price-sensitive people are with new features. For brand protection, go with value-adds instead. Extra months, bonus features, service bundles. You get the same conversion boost without teaching customers to wait for sales.