Why Discounts Don't Work the Way You Think
We once priced a product at 25% of its base price.
Not a limited-time flash sale. A sustained launch price — held for months while we figured out what the market would bear. The product was an upgraded version of an existing subscription, with meaningfully more value. We launched it cheaply because we wanted adoption.
We got adoption. We also created a problem that took over a year to undo.
Here's what I've learned about discounts after running sale campaigns at scale — hundreds of them, across five years, for a product used by 3.5 million paying subscribers.
Discounts Increase Volume. The Question Is Which Volume.
The standard mental model of discounting: lower price → more buyers → higher revenue.
In the short term, this is often true. Sales spike during discount periods. Transactions go up. The dashboard looks good.
What the dashboard doesn't show is what's happening to the users who didn't buy.
Every time you run a deep discount, you're making an implicit promise to every user who sees it:
"A better price is available if you wait."
A significant portion of your potential buyers — particularly in price-sensitive markets — internalise this. They don't buy at full price anymore. They wait. They've been conditioned to expect a sale.
In India's developing market, where users are acutely price-conscious and have long memories, this conditioning happens faster than you'd expect.
We saw it clearly in cohort data: users who had been through multiple sales cycles showed different purchase timing patterns than users who joined the platform between sales. The repeat buyers had learned to wait.
The discount increased volume during sale periods. It decreased conversion at full price. The net effect on revenue was positive but smaller than it appeared — and the effect on brand was negative in ways that are hard to quantify but real.
The Product Perception Problem
Here's the deeper issue with heavy discounting:
When users see a product priced at ₹25 that was recently ₹100, they update their beliefs about the product's value. Not consciously, necessarily — but the anchor shifts.
The product that was worth ₹100 is now, in their mental model, a ₹25 product that sometimes charges ₹100.
We saw this when we launched an upgraded subscription tier at a significant discount:
- Intention: Drive adoption and demonstrate value before normalising price
- What happened: Users who bought at the low price felt cheated when the price increased, even though they'd received full value
- Why: The low launch price had set the anchor
We eventually normalised pricing through gradual increments — ₹5 to ₹10 increases over several months, timed around exam notification cycles when intent was highest.
- Revenue increased
- Conversion didn't drop materially
- Users who were going to buy at ₹499 generally also bought at ₹549
The lesson: The price users see first becomes the reference point. Set it too low and you're negotiating against yourself for the rest of the product's life.
When Discounts Actually Work
I'm not arguing against discounts. I'm arguing against undifferentiated, frequent, deep discounts applied without strategic logic.
Three situations where discounting is genuinely effective:
1. Commoditised Markets
If multiple competitors offer nearly identical products at similar quality, price becomes the primary differentiator. Discounting here is rational because you're competing for the same demand pool and price is the most legible variable.
Risk: You're training the whole category — not just your users — to be price-sensitive.
2. Urgency-Driven Events With Genuine Scarcity
Our best-performing sales campaigns were the ones where the offer was genuinely time-limited, and the pre-buzz was aggressive enough that users believed it.
The December 2025 campaign:
1.62 lakh transactions in a single day — 1 lakh within the first hour alone (12 AM – 1 AM). ~3.7% of annual platform transactions generated in 60 minutes.
That kind of concentration happens when users genuinely believe the window is closing — not when they've been conditioned to expect the next sale in 30 days.
The difference between FOMO that converts and FOMO that users ignore is credibility. Credibility comes from spacing your sales, honouring your deadlines, and making each event feel genuinely exclusive.
3. New User Acquisition for High-LTV Products
If your renewal rate is high (ours was 50–60%) and your product LTV justifies a lower first-purchase price, a new-user discount can make economic sense.
The key: Restrict it strictly to new users.
Giving your existing user base a discount on renewal is paying retention costs for behaviour that would have happened anyway.
The Alternative: Stable Pricing With Exclusive Windows
What works better than frequent deep discounts:
A pricing architecture with a stable base and genuinely exclusive discount windows.
| Old Approach | Better Approach |
|---|---|
| 8 sales/year at 40% off | 3 sales/year at 30% off |
| Users always expecting a sale | Users planning around real events |
| Eroding full-price conversion | Strong full-price baseline |
| Discount feels expected | Discount feels earned |
A second lever often left untested: slightly reduce the base price instead of discounting.
A product that moves from ₹499 to ₹449 as its regular price — with no sale framing — often converts better over time than a product oscillating between ₹499 and ₹299.
The stable lower price becomes the anchor. The occasional discount from there feels like a genuine event.
The India-Specific Wrinkle
In India's developing market, there's an additional dimension: the economic sensitivity of your user base directly affects how they respond to pricing signals.
A student from a family earning ₹15,000/month isn't buying on impulse. Every ₹500 is a considered decision — discussed with family, weighed against alternatives.
For this user, a discount isn't just an incentive — it's permission to buy something they already wanted but couldn't justify at full price.
This means discounting works — but it works for a specific reason (reducing the justification barrier) rather than the standard reason (price sensitivity).
Which in turn means: the right discount is the smallest one that clears the barrier, not the deepest one you can afford.
We found that the difference between a 20% and a 40% discount on conversion rate was much smaller than the difference in margin. The users who needed permission to buy got it at 20%. The additional 20% mostly subsidized behaviour you'd already earned.
The Honest Summary
Discounts work. They just work differently from most teams that model them.
- ✅ For urgency and exclusivity — not for chronic volume
- ✅ For new user acquisition — not for retention
- ✅ In commoditised markets — not for differentiated products with brand equity
- ✅ When they're rare enough that users believe they're real
Run them strategically. Space them deliberately. Make the pre-buzz match the scale of the event. And measure not just the sale week spike — but what happens to full-price conversion in the month after.
That's where the real discount strategy lives.
Dhairya Mehta is Director of Growth and Marketing at Testbook, where he owns the P&L of India's largest exam-prep subscription. He writes about growth, India's developing market, and building things.
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