PlayAbly Podcast: Episode 32: No More Discounts- How Discounts Destroy Your Margin and What to Do Instead

Retailers are stuck in a discount addiction that’s killing margins—and consumers are playing right along. In this episode of the PlayAbly Podcast, we dive into the psychology behind discounting, why it’s no longer sustainable, and how shoppers have been trained to expect coupon codes at checkout.

But what if you could replace discounts with excitement and still drive conversions? Enter Buy Now, Win Later, a smarter, gamified alternative that taps into reward psychology, boosts full-price sales, and makes shopping fun again.

We’ll explore how ecommerce brands are using conditional rebate promotions—tied to sporting events, pop culture moments, and more—to create retention marketing flywheels without slashing prices. Plus, learn why this approach improves email capture, loyalty, and repeat purchase rates, and how brands are seeing up to 50% of weekly sales come from these promotions.

Looking to build customer loyalty without devaluing your products? Discover how customer loyalty gamification can help you break the discount cycle and build long-term brand love.

✨ Learn more about PlayAbly and explore how ecommerce gamification can transform your customer journey and maximize retention—just in time for BFCM.

Welcome to the PlayAbly Podcast, where we dive into the art and science of gamification, customer engagement, and driving conversions. 

At PlayAbly, we turn passive audiences into active customers through shoppable games and playable experiences that transform how brands connect with their customers. Book your free demo here.

Thanks for tuning in to the PlayAbly Podcast! Ready to engage your customers like never before? PlayAbly creates branded Shoppable Games that drive results. Don’t forget, mention the podcast during your free demo, and get $500 off (book here). Learn more at playably.ai

Get Your First Month of PlayAbly free when you mention this Podcast during your free PlayAbly Demo - learn how gamification can improve your ecommerce shop at www.playably.ai

Transcript

Welcome back to the PlayAbly podcast- your home for all things retail and ecommerce. Today we're talking about discounts and how many companies are forced into using them and how to stop. 

Retailers have trained us so well to expect discounts that 70% of online shopping carts get abandoned, with most shoppers just waiting for that sweet discount code to arrive in their inbox. I know the first thing I do when I find a new brand I am interested in buying from is sign up for their mailing list to get the welcome discount and to check my Honey Chrome extension.

That's such a fascinating psychological game we're all playing. And retailers are losing billions because of it. Every 1% price drop cuts profits by 8-9%.

 I actually did this last night. Added items to three different carts, signed up for newsletters, closed the tabs, and this morning - like clockwork - I had discount codes from all of them. One was even 40% off.

Well that's exactly what they've trained us to do. The average discount during the Black Friday, Cyber Monday holiday season hit 23% last year, with some categories like apparel pushing 30%. With tighter margin this year due to tariffs, I doubt discounts will be as high but people also are more skiddish to spend.

Let's talk about how "Black Friday" has basically become "Black Quarter" - these sales seem to start somewhere around Labor Day now and just... keep... going. Should we even call it Black Friday anymore?

That's right - Amazon kicked off their Prime Deal Days in early October last year and honestly I think they have about 2 or 3 every year, and nearly half of shoppers now start their holiday shopping before November just to catch these early deals like this.

The whole thing feels a bit like a race to the bottom, doesn't it? I mean, these browser extensions like Honey and Capital One Shopping have turned discount hunting into this completely automated process. I don't even have to look for a discount, it tells me when I get to check out "hey, we have a discount for you to try". Browser extensions are why I never purchase from my phone.

And that's creating serious problems for retailers. These extensions have actually faced legal challenges over their practices, especially around affiliate marketing. Any affiliate who gets their code on there will get money they technically didn't earn from sales.

So what's the solution? Because it seems like retailers are stuck between a rock and a hard place. They can't afford to keep discounting, but they also can't afford to stop. If they don't discount, you can bet their competitor will. No matter how thin margins are, I don't think there's a retailer out there that doesn't discount.

Well, that's where this fascinating new approach we launched called "Buy Now, Win Later" comes in. Instead of cutting prices, it uses customer psychology to make paying full price more exciting.

How exactly does that work? Because I have to tell you, as someone who loves hunting for deals, I'm skeptical anything could be as appealing as seeing that price drop.

Think about it this way - instead of getting 20% off, your full-price purchase will give you an opportunity to get the item for free. Now Free could mean a cash rebate or a gift card for the value of your purchase but either way it's exciting and taps into parts of your brain that put this conditional rebate offer in the same category as scoring a discount - even if you don't win.

That sounds interesting, but does it actually work? Like, are people really willing to give up their discounts for the chance at something special?

The research is pretty compelling. It taps into something called the goal-gradient effect - people get more motivated as they get closer to achieving a reward. They also highly over-estimate their chances of winning so the odds you're offering for the conditional rebate event may be 1 in 10 but customers will feel like they have a 50/50 chance and then you're more likely to pay full price to get there.

So what are these "conditions"?

Anything! PlayAbly will come up with a win condition that fits your fan base - you can ask us for a sport, or TV show, or celebrity to plan it around and we will give you options. Last week we ran a promotion with Red and West who sells college gameday gear. The conditional rebate was buy an Oklahoma Sooner's item at full price and if the Sooners beat Michigan by more than 24 points, you get your choice of cash rebate or gift card. 

So what happened? 

It was close but the Sooners won 24 to 13. 

Well that's good, I imagine the brand would go bankrupt if the rebate condition hit. 

Actually no- PlayAbly covers the bet so if the Sooners had won and everyone got a refund who bought an item that week, Red and West would still walk away with the same profit as if it didn't hit.

Wow that's awesome. How were sales? 

The promotion drove 50% of the sales on their website that week. On average, we're seeing 43% more purchases, 2x repeat customers, and a lot new mailing list sign ups. Some brand even offer a small discount code to customers if they did not win as a consolation. 

But how do retailers actually make this transition? I mean, they've spent years training us to expect discounts. You can't just flip a switch overnight, right?

That's where careful implementation comes in. Start small - maybe with one product line, hide the discount code field, and try a simple "Buy Now, Win Later" mechanic. Measure everything - average order value, margins, repeat purchase rates.

And I imagine timing is crucial too. You probably wouldn't want to launch something like this during the holiday season when everyone's expecting those deep discounts.

That's a really important point. The ideal time would be during a slower period when you can focus on educating customers about the new system. Which is why we have a lot of brand running the promotions now so that when BFCM comes along, their customers are already bought in. We have promotions coming up with rebate conditions for the Ryder Cup, the Daytime Emmy Awards, the Thanksgiving Football game, and more.

The more we talk about this, the more I can see how it could actually make shopping fun again. Instead of this constant calculation of percentages and waiting for price drops, it becomes more about the experience and anticipation.

And that's really the key - creating a sustainable model where both businesses and customers can thrive without relying on constant discounts. Plus brands get to tie themselves to specific cultural events and sports teams, helping to develop brand affinity.

Well, as someone who's been pretty proud of my discount-hunting skills, I have to admit - this new approach sounds intriguing. Maybe it's time for all of us to break free from this discount dependency cycle we've created?

That's exactly right - because in the end, a healthy retail environment needs to work for everyone, not just the most dedicated discount hunters. It's easy to start and we get your first promotion set up in less than two weeks. With the Olympics, Superbowl, Taylor Swift Wedding, and World Cup Games coming up, we'll have plenty of options for brands to choose from. 

Well you heard it here, sign up for your demo of Buy Now, Win Later on the PlayAbly.AI website and get started today. We'll be back next time for more ecommerce tips, tricks, and trends on the PlayAbly podcast.