DECEMBER 21, 2016 Are you competing for business this holiday season? If you’re thinking about offering holiday discounts, you’re in good company.

According to the American Express Holiday Growth Pulse, a survey of over 1,500 small- and middle-market business owners across a variety of industries, retailers feel a lot of pressure to discount. The study found that “small and middle-market retailers are putting a great deal of effort into making sure they see strong results. As retailers of any size look for ways to succeed, many feel they will need to offer sales and promotions. Sixty-four percent of small-business retailers and 88 percent of middle-market retailers think they will need to be more aggressive in sales and promotions in order to stand out.”

The study also discovered that 42 percent of small retailers, and 66 percent of middle market retailers will start offering holiday discounts earlier this year compared to last year.

Benefits of Offering Holiday Discounts

Holiday discounts can serve a variety of important purposes, notes Keren Kang, CEO of Native Commerce, a digital marketing and e-commerce company. “Discounts serve to drive sales for the busiest buying season of the year.”

Since the Great Recession, holiday shoppers now expect discounts, believes Ted Mayeda, co-owner of gardening store M & M Nursery and their online store, Fairy Garden Expert. “With discounts being offered by competitors, we find it necessary to offer some holiday sales and special offers. In addition to keeping us competitive, offering discounts gives us an ideal opportunity to thank our regular customers for their loyal patronage throughout the year.

”Discounting can also do double duty for your business. It helps clear out inventory to make room for new products for 2017, adds Kang. You can take advantage of this by discounting the products for which you have the largest remaining inventory and for those that feature new and improved versions for next season.

Choosing Holiday Discounts

Determining the best type of discount for your business takes analyzing the pros and cons of the various options. You may want to start thinking outside of the proverbial gift box.

“Sometimes, coupons and markdowns aren’t compelling enough for your business,” says Kang. “Think of unusual ways to make holiday discounts work for your business, such as guaranteed shipping, free shipping, gift wrap and bulk discounts.”

Here are a few holiday discount options you may want to consider:

Coupons. Coupons offer you a chance to give customers what can be seen as a valuable discount. And the coupon itself can be an advertisement for your business. Coupons can also offer you a great way to introduce new product lines, as well as clear out inventory before the New Year.

The key to coupons is using them strategically by paying careful attention to the expiration date. Instead of giving customers until December 24, you can inspire more urgency by having the discount expire a few days earlier. Coupons can also be an opportunity to build your email list. When customers download a coupon or coupon code, you can require that they enter their email addresses for your database.

Free shipping. Online customers gravitate toward free shipping. Offering to foot the bill for shipping may help increase conversion for your online store. Think carefully about your free shipping strategy. Consider a minimum order size for free shipping, which may help entice customers to buy more merchandise.

Percentage-based discount. If you are planning to discount much or all of your merchandise, you may want to consider offering a percentage-based discount.

Offering 10 to 25 percent off your entire inventory may help, as it encourages customers to spend. Encourage shoppers to buy sooner, rather than later, by reducing the discounts as the holidays approach. For instance, consider starting at 25 percent and work your way down to 10 percent.

Free gift. Customers like free, so a complimentary loss-leader gift can be a great way to get people to buy. This strategy also offers you a chance to clear your inventory of items that aren’t selling as well as you’d hoped. Depending on how much inventory you have, you can give a free gift for all purchases, or set a minimum order amount.

Informing Your Customers About Holiday Discounts

Letting your customers know about discounts is, of course, important. While you don’t want to hit them over the head, you do want to make sure they hear and see you over the many other offers circulating at this time of year.

“Email communication is the most non-intrusive, [targeted] way to introduce discounts,” says Kang. This also gives you a chance to offer customers additional special discounts. For instance, with a percentage-based discount campaign, you could offer your customers an additional 10 percent off or some other incentive that rewards them for their loyalty.

Social media is another good place to announce your discounts. “Consider social media boosts like Instagram and Facebook,” says Kang. “Just make sure your creatives are in line with each platform’s tendencies. For example, Instagram loves beautiful, non-stock imaged photos that show vibrancy, interest and life.” And make sure that you have someone monitoring the social media discount campaign so that customer questions are answered quickly.

When Not to Offer Holiday Discounts

Think carefully about your long-term strategy before discounting items during the holidays. If you’re positioning yourself as a high-end brand, it’s generally not advisable to discount a wide variety of products. You may just want to discount a handful of items that you wish to clear from your inventory. Or you may even find that your marketing strategy requires that you don’t discount at all.

Read more articles on marketing & sales.

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