Discounts can help you sell your products in volume. They can really help you get started with a new product, shifting enough volume that Amazon’s search algorithm will sit up and take notice.

But discounts can also be dangerous. It’s quite easy for buyers to get used to the idea that your product is only “worth” the discounted rate.

Discounts only really work when the perceived value of your product is higher than the discounted price. If, for instance, you doubled your price and then offered a 50% discount, most buyers would work out that it’s not a great deal.

This is one reason a lot of luxury goods brands, like Hermes or Montblanc, don’t discount. They want to be seen as exclusive, and one element of that is having prices that deter the less wealthy from buying the product. If they are discounted, they might lose some of that exclusivity.

A way of holding special offers that suits this kind of product is a ‘valued customer perk’, whether that’s giving a discount on subsequent orders (for ‘valued regular customers’), a special bag or gift that accompanies the order, or the chance to attend a private sales evening. It can deliver the same value, but it’s differently presented.

You may not want that kind of exclusivity but you will still want to ‘anchor’ the perception of value at your original price. You can do that in a number of ways, by limiting the availability of discounts. For instance:

•      you can limit the discount to a single channel, for instance, Vipon;

•      you can limit the discount to a certain number of units of stock (“When it’s gone, it’s gone”);

•      you can limit the discount to a particular time (Black Friday, lightning deals);

•      you can create conditions that must be met (bulk buy, coupon, first-time buyer, repeat buyer); and

•      on Amazon, you can also limit the purchases in units that each customer can make.

This last option is ultra useful. Sometimes, people will try to buy up your stock at bargain prices so that they can resell on Amazon and undercut your normal prices. By limiting the number of unit per customer, you not only help keep your discount offer discrete, you also stop these nimble sellers from scalping you.

Building up a loyal customer base helps you discount strategically. If, for instance, you sell own-brand leather boots, loyal customers will know your regular price is (say) $110. If you present your discounted sales as a special end-of-line offer, or discount only small sizes, customers will quickly see that you’re not discounting the product line as a whole. And customers who want to get that particular offer will know that the discount is worth having, so they’ll get their orders in fast.

“Free” is a huge motivator that you can use to move stock without discounting, or in addition to a discount. Here again, customer perceptions won’t necessarily match the cost of what you’re giving away. One luxury baggage brand gives a free padlock and key fob with every bag sold. The cost is very small, but customer perception of the “free” gift is very favorable. (A similar giveaway is luxury hotels that don’t discount on price but offer a ‘free’ shuttle to the airport.)

Finally, use your discounts tactically to address particular customer segments or needs. For instance, customers switching to your product from a different brand will be more likely to try your product out if they get a first time discount. You might want to sell off last season’s inventory or encourage existing customers to purchase new products in your range.

There’s no doubt that discounts are a formidably good way of boosting your sales. You just have to use them very carefully, so that once your discount offer is over you can go back to your regular pricing.