Hello everyone. This is an update of the old but very useful material about gifts and discounts. Now with new scientific insights that are easy to apply in your business to increase profit. Also, you will be able to check your intuition in sales and marketing using interesting questions. So, are you intrigued? Let’s go! This is Masha Kaganovich with you, a marketer at Western Bid. And today’s article is on the topic of discounts and gifts.
Introduction: Are discounts necessary?
Some people never give discounts at all, except for Black Friday — once a year. Some people constantly advertise and offer discounts in stores. Well, let’s see if discounts and gifts actually have an effect and what is generally better — discounts or gifts.
History: The first advertising campaign
The first of its kind promotional campaign and gift was introduced in 1887 by Coca-Cola. Coca-Cola was the first company in the world to give people the opportunity to try Coca-Cola completely free of charge. Most often, this was a drugstore — a pharmacy or store where people came to buy small items.
And there was always a kiosk with water. So, Coca-Cola offered its water for free. And, practically, within 10 years — by 1913 — Coca-Cola was sampled completely free of charge by 8.5 million people.
As is well known, Coca-Cola holds the first, leading position in the carbonated water market. They demonstrated to everyone worldwide how important and useful any promotional campaigns, discounts, gifts, etc., can be.
How to make discounts on different platforms
So, this is clear with the history of this issue. If it’s your own store, doing this is complicated. You can only do it by lowering your price. By the way, a promotion can be made on eBay even without a store. But I mean sales. You can set a certain percentage discount on the entire store or on specific listings. This is quite feasible.
On Etsy
On Etsy, there are two ways to promote in this manner. This is sale, so to speak, where you can set a percentage discount again on all your listings in the store or on one specific product. Or you can create a so-called coupon. A coupon is not a discount that will apply to everyone, meaning everyone who visits your store and sees it. No, it’s an individual coupon you can send to buyers at your discretion.
For example, this could be:
- Free shipping
- Or a percentage discount on a specific listing or multiple listings
- Or a fixed amount you deduct for this buyer
For example, you could run such a promotion for all people who viewed your items and added them to their carts on Etsy.
What works better?
Now the question arises — what is more effective:
- Offering free shipping?
- Offering a fixed discount?
- Or perhaps just providing a percentage discount?
The power of the word “free”
Long ago, when I studied at university, I remembered a simple rule known by almost all marketers: people respond best in advertising to two things — the word free — free, and photographs of little baby — small children.
That’s why you often see in advertising: free gift, free such-and-such — free-free-free, free, free, free. And very often you see photographs of small children — or, at the very least, pets. This also strongly influences people.
So if you have some household items, you can easily photograph them with a small child. This actually really helps sales. But that’s just a small aside.
Why “Buy 2, get 1 free” works better than a discount?
You probably noticed — store promotions often include such offers: buy one item, get one free. Or, even better — I like this — buy two items, get one free.
Why do people do this? Why not just say: “50% off”? Because if you buy one thing and get one for free — that’s exactly a 50% discount. Or why not say: “I give a 33% discount”? That’s the same as buying two items and getting one free.
It turns out, the phrase “get one free” has a greater emotional effect on buyers than a percentage discount. Because no one mentally calculates: “Oh, I buy two, and one is free — that’s 33%.” No one does that in their head, right, these percentages or 50%.
This is how a person is wired — as we discussed earlier — they make purchase decisions purely on an emotional level. And people respond very well to the word “free.”
Profit advantage
Another advantage of such a free item. Look, if you simply offer a 50% discount, you will sell one item, so your total income is only from that one product.
But if you offer two and one for free — yes, that’s a 30% discount, but you sell three items at once. This increases your income and overall profit. It’s definitely not the same as offering a percentage discount — much more profitable.
Be careful: bargain hunters
I want to make a small note: when offering discounts, always be cautious and try to avoid so-called bargain shoppers. There are buyers who specifically watch for discounts and buy things they don’t really need. People who want to buy everything super cheap.
Such buyers are also often known for returns and leaving negative reviews. So it’s better to stay away from these clients.
Avoid overly large discounts
Therefore, many sellers try to avoid very large discounts — 90%, 80%. Usually, such major sales attract these kinds of buyers. Also, such deep discounts can damage your brand, your store’s brand.
So, you sell items for $200–$300, and then what? You constantly have these items on sale for $10. This will undoubtedly harm your brand and affect how people perceive the quality of your product and your store.
This is what I mentioned in the material about dumping. Just once more — discounts discussed should be 10, 5, 15, 20, 30%. In extreme cases, if it’s a very big sale — even 50%. But be cautious with all discounts exceeding this level.
Alternative for handmade: gifts
Actually, craft sellers who create items by hand — very often, discounts can attract such a large volume to your store that you won’t be able to handle or produce everything in time.
And perhaps for such special and expensive items, a gift — a small token that suits your target audience — might be even better. For example, if you sell items for a kids’ room — maybe garlands, embroidery, a rug, or children’s items — you can add a small toy or additional gift for the child.
The importance of a personal approach
One of the main reasons people buy on Etsy is because they want to see this personalized approach. And, of course, such a small gift will warm them, give them a sense of care and increase the chances that the buyer will return to your store. Customer return rate is a key indicator of loyalty and a predictor of your store’s future.
Question 1: Personalized card
Now let’s test your intuition. How much do you think the share of repeat purchases will increase if you add a personalized thank-you note and an exclusive coupon to the order?
Your options:
- A. 10–15%? Nice, but quality of product still plays a major role
- B. 25–40%? Noticeable increase, especially during holidays, if there’s a coupon and a clear call to action
- V. 50–60%? Most buyers will return feeling valued
The correct answer
So, the correct answer is the second — from 25 to 40%, and during holiday seasons — up to 52%. Research also shows that 70% of buyers leave five-star reviews when they receive a simple personalized note. So take this as a sign — start giving small, warm gifts to your customers. Got the correct answer? Take a star for yourself. Collect as many as possible. And at the end, we will see how good your sales intuition really is.
Marketing experiment: discounts vs gifts
So now I want to show you an interesting marketing experiment recently conducted by one online store, which demonstrated what is more effective and when to use gifts versus discounts.
Conditions of the experiment
Let’s look at this experiment. We have three columns: the first column — is a regular email. This is an email that the online store sent to its customers, its database. There was a link to their online store with photos of products, news, interesting articles. The first, brightest green column shows such an email that contained no discounts or gifts, nothing.
The second, middle column, shows the same email but with a gift — a card or a free specific gift.
The third, lightest green column shows the same email but with a percentage discount.
Results: open rates
So, 22% of people who received the emails opened them. The second column shows us what percentage of people opened the email when there was a free gift mentioned. We see that emails with a gift are opened significantly more — 37.4%. And if we offer just a percentage discount in the email subject — 34%. Slightly worse than with a gift.
Click-through links
Now, how many of those who opened this email actually click through to the store? These are people who just showed interest by viewing and saw an interesting photo. They are not interested in buying immediately. They’re just interested in some article or information. And they click more often.
Conversion to purchase
The final aspect — how many of those who click actually buy? Let’s see: less than 1%. 0.2% for the email without discounts or gifts — just 0.2% make a purchase. For the email with a free gift — 7%. And with a percentage discount — 2%.
In any case, both discounts and gifts increase sales. Although click rates might not be as high, email open rates and actual purchases are significantly better. And we clearly see an advantage in emails with gifts, not just percentage discounts.
Conclusions from the experiment
What does this mean? We can draw some key conclusions from the experiment: if you want to grow your customer base — if, as in the Etsy example, you want repeat business, good reviews, etc., i.e., volume is not as important as loyal customers — then it’s better to offer a free gift. But if you need to clear inventory, sell more — it’s better to offer a percentage discount. Why? Because people tend to buy more when they see a percentage discount, compared to a free gift. Depending on your product and your goals for your target audience, you can use this experiment to decide whether to offer a gift or a percentage discount.
Question 2: “Free” vs “For $0”
So, if a gift suits you more, let’s figure out how the same free promotion can be perceived differently by buyers. Imagine seeing two promotions for the same free gift.
Which option do you think sounds more appealing and will encourage more people to buy?
- A. Get the gift for free
- B. Get the gift for $0
The correct answer
The correct answer is B. Research shows that “$0” is stronger than just “free.” When a promotion is phrased as “for $0,” buyers feel they are saving the full price and evaluate the offer 20-30% higher. The word “free” focuses on the gift itself, not on the savings. Conclusion: If you want to boost the effect of a free promotion — say “$0,” not “free.” It psychologically turns 0 into real savings.
Question 3: Secret bonus
Next, what if the gift isn’t just free, but also with a risk? Imagine on Etsy you give a customer a secret bonus. They don’t know exactly what they will get. Maybe $1, maybe $15. How will this affect the likelihood they will return to your store?
Choose one option:
- Option A. +12%. The surprise adds magic. People love casinos
- Option B. 0%. No difference. The main thing is that there’s a gift
- Option V. -17%. Uncertainty will cause suspicion. What if I get the worst?
The correct answer
So, the correct answer is V. -17%. A 2025 study in Psychology and Marketing shows: when a gift is uncertain, people experience emotional ambivalence, meaning joy and fear of disappointment. As a result, repeat purchases drop by 15-25%, even if the potential reward was big. Conclusion: gifts are good, but only if the customer knows what they will receive.
Question 4: Discounts and gender
Interesting — did you choose the right answers to the previous questions about gifts? But we have two final questions in the “Discounts” section. So, on Etsy, in the “Clothing” category, a 30% discount increases impulsive purchases.
How do you think the buyer’s gender affects this effect?
- A. Equally for everyone — +35% impulse
- B. Women +40% emotionally, men +25% rationally
- C. Men +40% because percentages seem logical
The correct answer
So, the correct answer is B. Studies have shown that discounts increase impulse by 35% on Etsy clothing, but women respond more strongly — +40%, emotionally: “Oh, this dress is mine!” And men respond +25% more rationally: “Is this a good deal?” Conclusion: if you want more impulsive clothing purchases — make emotional discounts for women and logical ones for men.
Question 5: Fixed vs percentage discount
Interesting, which discount sells better in America — fixed or percentage?
For example, if an item costs $150 on Amazon, which discount presentation would make an American buy faster?
- A. 20% OFF — first option
- B. SAVE $30 — second option
- V. It doesn’t matter. Math is the same, the result is equal
The correct answer
The actual correct answer is B. SAVE $30. Studies show that for items over $100, a specific amount increases sales by 25-40%. Because Americans think: “Oh, $30 in my pocket — that’s my money.”
There’s also a nuance — $30 is better than 5% OFF. For cheaper items, percentages work better because the percentage appears larger numerically — 20%, 30%. But, in reality, the actual discount might be just one or two dollars. So, choose the option where the number is bigger.
Test your level
Have you counted your stars? Here’s your sales intuition level:
0 stars — Beginner. Nothing to worry about, our channel has very useful material “9 tips and tricks for when to do a discount,” which will help you understand this better.
1 star — Taking the first steps. You sense it, but not yet everything. I recommend watching “Personalized gifts 2022 on Etsy.”
2 stars — Average. 50/50. Sometimes you guess right. Learn how to create and send coupons and discounts on Etsy and eBay. Improve your skills.
3 stars — Marketer. Good intuition. You already understand how the client thinks.
4 stars — Pro. Almost perfect. Just a little more, and you’re a discount guru.
5 stars — Pure sales genius. You read buyers’ minds. Etsy, Amazon, eBay — your home.
Now, apply your knowledge in practice. And may your sales soar like these stars. I hope this article was useful and interesting for you. Thank you very much for your attention. Bye-bye everyone!
