Setting Prices in your Zen Cart

That Software Guy
© 2007 All Rights Reserved

If you sell - or want to sell - products on the Internet, you already know about the importance of selecting the right discounting strategy. What you may not be aware of are all the many ways of implementing a discounting strategy in Zen Cart™, a popular open-source shopping cart program. We'll look at some of the approaches you can take, using both built-in facilities from the cart's stock distribution and third-party add-ons called "contributions."

Discounting Philosophies

Before we get into specific discounting mechanisms, let's spend some time thinking about when and why a discounting program might make sense.

Clearly discounting is closely tied to pricing, and a pricing strategy which trims margins to the bone may not be compatible with discounting. In fact, margin erosion is a classic objection to discounting - but it need not be an obstacle.

What if you only discounted your higher margin items?
What if you discounted lower margin items only when purchased along with a higher margin items?
What if you only provided discounts to high-value customers?
What if you only discounted sales over a certain dollar threshold?

Rather than thinking about discounts as a reduction in bottom line profitability, discounting can be seen as a way to make sales which might otherwise not have been made at all. Indeed, rather than reducing profits, discounting can be seen as a way to

Encourage customer loyalty
Incent volume purchases
Move unwanted stock
Build goodwill

There is no "best of breed" discounting model; your discounting program should be custom designed to compliment your business plan, your inventory and your sales objectives.

Pricing On the Internet

The chief impediment to discounting in your online store might well be the lack of software support for your desired approach. Assuming your shopping cart permits modifications, you have two options:

Contract a software developer to implement your pricing and discounting policies
Align your policy with what discounting mechanisms that are currently available in your cart

I will focus the remainder of this article on currently available pricing solutions in Zen Cart. Obviously given a sufficiently large budget, any of these could be tweaked and tuned to behave exactly as you wish, but the price of bespoke software is prohibitive for many small merchants.

Visibility of Discounts: In the Cart or At Checkout Time?

Zen Cart has multiple mechanisms for altering the final price of a product. Some of these mechanisms adjust the price directly, and are visible in the cart. Others create a "discount" figure and are not available until checkout time. The latter are called "Order Total" modules, because they affect the order total (rather than the price of any particular item in the order.) Here are two illustrations:

	A product whose price is reduced in the cart (using the Special mechanism discussed below). The display of this price reduction can be set to display by dollars or percentage, or not at all.
	An order whose price is reduced at checkout time via the Group Discount Order Total Module. Discounts are not broken out; a single dollar figure is provided.

Why would you choose to do it at checkout instead of in the cart? Typically this choice is imposed on you based on the design of the discounting package. You must decide on which discounting method makes the most sense for your business first. For instance, do you have a key group of customers that get 20% off everything? Then Group Discounts (an Order Total module) might be a good choice. Would you like to offer pairs of products whose price is reduced if both are purchased? Then look at Better Together. On the other hand, if you just want to discount one item or category for a period of time, then a sale or special is what you want to run, and this will show up in the cart.

In the Cart: Sales and Specials

The two most common in-cart discounting mechanisms are Sales and Specials. They operate similarly, but have different scope: specials are for products, while sales are for categories of products.

A special specifies a new price for a specific product. That price can be a percentage discount off the original price (20%), or a new price ($20.00).

A sale specifies a new price for a one or more categories of products. The price can be a percentage or dollar discount off the original price, or a new price.

Both specials and sales can be constrained to only apply for certain calendar periods.

From a customer's perspective, sales and specials look identical when looking at a single product. Here are the three possible display permutations: displaying the discount as a price discount, displaying the discount as a percentage discount, and not displaying the discount at all. Note that in each case, the original price is displayed with strikethrough.

	Displaying the discount as a percentage off base price
	Displaying the discount as a dollar figure off the base price
	Not displaying the discount

Sales and specials interoperate in a highly configurable manner. Sales can be configured to apply on top of, instead of or only in the absence of specials. Here's an example with a sale on top of a special:

$5.00 off Sale on top of 25% off special

At Checkout Time: Coupons

Ever since Mr. C.W. Post (of Post Cereal) invented the coupon in 1895, coupons have been an important component of retail pricing strategy - as well as a powerful brand and goodwill building mechanism. Zen Cart has a built in coupon feature which permits discounting by a fixed amount or a percentage of the total. Once created, coupons can be restricted to apply to specific products or categories. Coupons use can be restricted on a per customer or global basis if desired, as well as a date range.

At Checkout Time: Group Discounts and Better Together

Group Discounts and Better Together are examples of Order Total Modules, which compute a discount which is shown at checkout time. Group Discounts is built in to Zen Cart; Better Together is an add-on contribution which I wrote.

The concept of group discounting is simple and intuitive - customers are added to discount "groups" and given percentage discounts, possibly including tax and shipping, on their total purchase amounts.

Better Together is more complex, but still familiar to most customers since it is a promotion style that Amazon.com uses. Items are "linked" and a discount is provided when both linked items are purchased. The product detail page for an item promoted by Better Together might contain upselling text such as this:

Buy this item, get a Microsoft Intellimouse Explorer at 50% off

If both items were purchased, the discount would be displayed at checkout time on the final page:

Shopping cart showing Better Together discount

Quantity Discounts - Your Choice

Quantity Discounting is a time-tested mechanism to generate larger volume sales. The approach is simple: buying in volume lowers the unit price.

Zen Cart has two Quantity Discounting mechamisms: a built in one, which appears in the cart, and a third-party contribution, which operates as an Order Total module.

Zen Cart's Quantity Discount feature	That Software Guy's Quantity Discount Contribution
Only allows per-product quantity discounts	Allows you to discount by item, by parent category or by all items in the cart
Must be configured for every product on which you want to offer quantity discounts	Quantity Discounts Contribution applies to all products (except those you specifically exempt)
Allows unlimited numbers of discount levels, but discounts must be individually configured on each product	Allows only five discount levels, but discounting is applied to all products except where specified
Marketing text is fixed, automatically generated	Marketing text may be customized to your needs, but must be added manually

Determining the Right Strategy

In conclusion, a great number of discounting mechanisms are available in Zen Cart. Determining which ones are the best match for your business will depend on your marketing mix. Discounting can not only improve the bottom line, but can also have the effect of building goodwill and increasing the stickiness of your brand. Best practices in discounting are to test various strategies, measure their effectiveness, and adjust as needed.