Discounts. What are they good for? The benefit of a discount to customers is obvious. But what about you as a merchant? Is the increased volume of sales worth the reduced margins and the potential dent to your brand’s identity and prestige?

Whether to offer discounts or not is a divisive subject. Some say offer discounts. Others say never dare. There’s no consensus on discounts but it has to be somewhere between the two extremes that are Burberry, which would rather burn excess inventory than discount it, and Macy’s, which is discounting itself into the ground.

Urgency is the secret ingredient.

1. Make a great product

A discount doesn’t make a terrible product magically better. People would line up for miles to buy a discounted Lamborghini. Nobody will care about a rusty old Honda Accord with torn seats even if you were giving it away for free.

This is the reason why some discounts don’t work. Merchants apply them to already crappy products. Customers know you just want some sucker to offload those products on. Unless the discount is low enough, few will bite.

But if you make a genuinely desirable product, then customers will already be aware of just what a great deal they’re getting and trample each other for a chance to get that discount. Gimmicks will never beat genuine value. If your product is sub-par, discounting isn’t the route to more sales. Product improvement is.

2. Make discounts rare

Unless your business model is specifically that of a discount store like Costco, then your discounts should be rare. As rare as hiccups, not as common as swallowing.

While discounts have been shown to drive up sales, it only happens because of their rarity. Humans have an intense fear of missing out. Discounts exploit that fear. But if you always have a discount going on, the customer has nothing to fear. He’ll tell himself, “I’ll come tomorrow. There’s always a discount here.”

Your discounts won’t have a sense of urgency if they’re ever present. As great marketing advice goes: you’re not selling against the competition. You’re selling against inaction. More sales are lost because a customer decides not to buy anything rather than actually going to the competitor. Your offer has to be compelling enough that anybody who sees it only thinks: “I have to get this now.”

If you rarely offer discounts then regular customers will be struck with intense FOMO and actually buy more instead of keeping their money in their wallets.

3. Put time and order limits on your discounts

A timer is a great way to up the urgency. You can offer your discounts for say 24 hours. Or 48. Or a week. While there’s no generally accepted time length, the shorter the better.

You can also offer discounts to a limited number of customers— say 1,000. This makes the urgency that much more urgent.

4. Bundle your products

Bundling is a great way to offer discounts. It compensates for the shrunken margins with a higher order value as customers spend more to get a discount.

5. Avoid targeting new customers with discounts

Discounts ought to be for existing customers as some sort of reward for sticking with you. That’s not to say you can’t offer new customers discounts. You can, but if that’s your only strategy then all you will attract are bargain hunters.

Your customer acquisition strategy should focus on value provision, not bargains. Bargain hunters don’t make for loyal or valuable customers.

6. Offer loyalty points and exclusive discounts

If you have to or want to keep running discounts, you can have a loyalty point system in your store. Say once a month, customers use their loyalty points to purchase something. This will depend on you and your conversion system but it will motivate customers to shop regularly for that discount.

You can also have exclusive discounts for customers who purchase products above a certain dollar amount. Such discounts are more appreciated than a flat 20% off for everyone because the recipients view them as a deserved reward rather than an enticement.

To them it isn’t really a discount but more of a bonus. This can be an especially great way to go with premium or luxury products whose standing in the market would otherwise be harmed by discounting.

This doesn’t necessarily have to be on a single order. You can add up customer expenditures over time and offer them personalized discounts once they hit certain milestones. Such a system only works if you have a desirable product— something you should have already.