Discount codes are one of the most effective tools in your Shopify toolkit. Used well, they drive conversions, reward loyal customers, and help you move inventory. Used badly, they train customers to wait for sales and erode your margins.
This guide walks you through every type of discount available on Shopify, how to set each one up, and the strategic thinking that separates effective promotions from profit-destroying ones. Whether you are running your first flash sale or building a sophisticated tiered discount system, you will find the practical steps you need here.
Before we dive in, it is worth understanding how discounts fit into your broader ecommerce pricing strategy. Discounts should complement your pricing, not undermine it.
Types of Shopify discount codes
Shopify offers four main types of discounts, each suited to different promotional goals. Understanding the differences is essential before you start creating codes.
Percentage discounts
The most common type. You set a percentage off the order or specific products. Examples include 10% off your first order, 20% off summer collection, or 15% off orders over a certain value. Percentage discounts work well for acquisition campaigns because the perceived value scales with the order size.
Fixed-amount discounts
A set monetary value off the order. For example, £10 off orders over £50. Fixed-amount discounts are easier for customers to understand and can be more effective for lower-priced products where a percentage discount would feel insignificant.
Buy X Get Y discounts
Also known as BOGO (buy one, get one). These encourage customers to add more items to their cart. You can configure these as buy one get one free, buy two get one half price, or any combination that makes sense for your margins.
Free shipping discounts
Shipping costs are the number one reason for cart abandonment. A free shipping code removes that friction entirely. You can set minimum order thresholds to protect your margins whilst still offering this powerful incentive. For more on reducing cart abandonment, see our guide to reducing cart abandonment on Shopify.
Creating a percentage discount code
Let us start with the most popular discount type. Here is how to create a percentage discount code step by step.
Step 1: Navigate to discounts
In your Shopify admin, go to Discounts in the left sidebar. Click Create discount and select Discount code.
Step 2: Choose the discount type
Select Percentage from the available options. You will see the discount configuration form.
Step 3: Set the code and value
Enter your discount code. Keep it memorable and easy to type — avoid special characters and excessive length. Something like WELCOME15 or SUMMER20 works well. Then set the percentage value.
Step 4: Configure applicability
Choose whether the discount applies to the entire order, specific collections, or specific products. For targeted promotions, applying to specific collections keeps control tight. You can also set minimum purchase requirements — either a minimum order value or a minimum quantity of items.
Step 5: Set eligibility
Decide who can use the code. Options include everyone, specific customer segments, or specific customers. For a welcome discount, you would typically choose everyone. For a VIP reward, you might restrict it to customers tagged in a specific Klaviyo segment.
Step 6: Set usage limits
You can limit the total number of times the code can be used across all customers, and whether each customer can use it once or multiple times. For welcome codes, limit to one use per customer. For flash sales, you might set a total usage limit to create scarcity.
Step 7: Set active dates
Choose when the discount starts and optionally set an end date. Always set an end date for promotional codes — open-ended discounts have a habit of being shared widely and used long after the promotion should have ended.
Step 8: Save
Click Save discount. Your code is now active (or will activate at the scheduled start date).
Creating a fixed-amount discount
The process is almost identical to percentage discounts, with one key difference: you enter a monetary value instead of a percentage.
Fixed-amount discounts are particularly effective when paired with minimum order thresholds. For example, £10 off orders over £60 encourages customers to increase their basket size to qualify. This can significantly boost your average order value.
When to use fixed-amount over percentage
- Low-price products. 10% off a £15 item is only £1.50 — not compelling. £5 off sounds much better.
- High-price products. A flat £20 off a £500 item sounds trivial. 10% (£50 off) is far more attractive.
- Gift cards and credit-style promotions. £25 store credit feels more tangible than a percentage.
- Tiered spending thresholds. Spend £50 get £10 off, spend £100 get £25 off — these are clearer as fixed amounts.
Setting up buy-one-get-one (BOGO) discounts
BOGO discounts are powerful for increasing units per transaction and moving inventory. Shopify's implementation is flexible enough to handle various configurations.
How to create a BOGO discount
- Go to Discounts > Create discount > Discount code
- Select Buy X get Y
- Under Customer buys, set the minimum quantity or amount and select the products or collections
- Under Customer gets, set the quantity of discounted items and the discount value (free, percentage off, or fixed amount off)
- Configure the remaining settings as with other discount types
Common BOGO configurations
- Buy 2, get 1 free — works well for consumable products
- Buy 1, get 1 50% off — good for fashion and accessories
- Buy 3, get the cheapest free — encourages larger baskets
- Buy any 2 items from Collection A, get 1 item from Collection B free — drives cross-category purchasing
One thing to watch: BOGO discounts can confuse customers if not communicated clearly. Make sure your product bundling and promotional messaging explain the offer plainly.
Free shipping discount codes
Free shipping is one of the most compelling offers you can make. Research consistently shows that shipping costs are the primary reason customers abandon their carts. A well-placed free shipping code can dramatically improve conversion rates.
Creating a free shipping code
- Go to Discounts > Create discount > Discount code
- Select Free shipping
- Enter your discount code (e.g.,
FREESHIP) - Optionally set a minimum order value — this is recommended to protect your margins
- Choose which shipping rates the discount applies to (all rates, or exclude rates over a certain value)
- Choose which countries the free shipping applies to
- Set usage limits and active dates
Strategic considerations
Rather than offering free shipping site-wide, consider using it as a threshold incentive. If your average order value is £45, setting free shipping at £55 nudges customers to add more to their basket. This is a fundamental principle of effective Shopify store design — using incentives that benefit both the customer and your bottom line.
Automatic discounts vs manual codes
Shopify offers two mechanisms for applying discounts: manual codes that customers enter at checkout, and automatic discounts that apply without any customer action.
When to use automatic discounts
- Site-wide sales. Black Friday, seasonal clearance, or store-wide promotions where you want every customer to benefit automatically.
- Threshold-based offers. Spend £100 and automatically get 15% off — no code needed, no friction at checkout.
- Simplified customer experience. Automatic discounts reduce checkout friction because customers do not need to remember or enter a code.
When to use manual codes
- Targeted promotions. Exclusive codes for email subscribers, social media followers, or influencer partnerships.
- Tracking effectiveness. Different codes for different channels let you measure which marketing channel drives the most conversions.
- Perceived exclusivity. Customers value a code they feel is exclusive to them more than an automatic discount everyone gets.
Creating an automatic discount
- Go to Discounts > Create discount
- Select Automatic discount instead of Discount code
- Choose the discount type and configure as normal
- The discount will apply automatically at checkout when conditions are met
Note: Shopify limits you to one active automatic discount at a time (though this can vary with Shopify Plus and checkout extensibility). Plan your promotions accordingly.
Setting usage limits and eligibility
Getting usage limits right is crucial. Too loose and your discount gets shared on coupon sites, destroying margins. Too tight and legitimate customers cannot use it.
Total usage limit
Set the maximum number of times the code can be used in total. This is useful for flash sales or limited offers where you want to create genuine scarcity. Once the limit is reached, the code stops working.
One use per customer
This prevents the same customer from using the code multiple times. Essential for welcome discounts and loyalty rewards. Note that Shopify tracks this by customer account, so customers who check out as guests might be able to use it again.
Customer eligibility
You can restrict codes to specific customer segments. This is powerful when combined with Klaviyo integration — create a segment of VIP customers in Klaviyo, sync it to Shopify, and create exclusive discounts just for them.
Minimum requirements
Always consider setting minimum purchase requirements. They protect your margins and encourage customers to spend more to qualify for the discount.
Combining multiple discounts
Historically, Shopify only allowed one discount code per order. This has changed with recent updates, and you can now configure discount combinations.
How discount combinations work
When creating or editing a discount, you will find a Combinations section. Here you can specify whether your discount can be combined with:
- Product discounts
- Order discounts
- Shipping discounts
For example, you might allow a free shipping code to be combined with a product percentage discount, but not with another order-level discount. This gives you granular control over stacking.
Strategy for combinations
The general rule is to allow combinations that make strategic sense. A free shipping code combined with a product discount can feel generous without significantly impacting margins. Two percentage discounts stacking, however, can quickly become unprofitable.
Using discount apps for advanced functionality
Shopify's built-in discount system covers most needs, but some promotions require more sophisticated logic. Here is when to consider apps.
Volume and tiered discounts
If you want to offer quantity-based pricing (buy 5 get 10% off, buy 10 get 20% off), you will need an app. Shopify's native discounts do not support tiered pricing out of the box.
Bundle discounts
For complex product bundling with dynamic pricing, apps like Shopify Bundles or third-party solutions provide more flexibility than native BOGO discounts. See our guide on creating Shopify product bundles for detailed options.
Scheduled and rotating discounts
If you run frequent promotions that need to rotate automatically, apps can automate the scheduling and management of multiple discount campaigns. Before adding any app, make sure to audit your existing app stack to avoid conflicts and performance issues.
Tracking discount code performance
Creating discount codes is only half the job. You need to track their performance to understand what is working and what is not.
Shopify's built-in analytics
Go to Discounts in your admin and click on any discount code. You will see usage data including the number of times it has been used and the total sales generated. For more detailed analysis, check Analytics > Reports > Sales by discount.
Key metrics to track
- Redemption rate. What percentage of customers who received the code actually used it?
- Revenue per redemption. What is the average order value when the code is used?
- Incremental revenue. Would these sales have happened without the discount?
- Profit impact. After the discount, are these orders still profitable?
- Customer lifetime value. Do discount-acquired customers have lower LTV than full-price customers?
For a comprehensive analytics setup, see our Shopify analytics guide.
Discount strategy best practices
Discounts can be a powerful growth lever or a slow poison. The difference is strategy.
Use discounts with intention
Every discount should have a clear objective: acquire new customers, reward loyal ones, clear seasonal inventory, or drive a specific behaviour. If your only reason for a discount is "we need more sales", pause and think more carefully about your approach.
Protect your brand perception
Constant discounting signals to customers that your products are not worth full price. Premium brands rarely discount heavily; instead, they use exclusive offers, limited-edition releases, and value-add promotions (free gift with purchase) that maintain brand equity.
Segment your offers
Different customers respond to different incentives. New visitors might need a welcome discount. Lapsed customers might need a win-back offer. Your best customers might prefer early access or exclusive products rather than money off. Use your email marketing to deliver the right offer to the right segment.
Test and iterate
Run A/B tests on your discount offers. Does 15% off convert better than £10 off? Does free shipping outperform a percentage discount? The only way to know is to test systematically. Read our guide on A/B testing on Shopify for methodology.
Common discount code mistakes
After working with hundreds of Shopify merchants, these are the discount mistakes we see most often.
1. No expiry date
Codes without expiry dates get shared on coupon sites and used indefinitely. Always set an end date, even if it is months away.
2. Forgetting to test
Always place a test order with your discount code before promoting it. Check that the discount applies correctly, that minimum requirements work, and that the final price is what you expect.
3. Overly generous stacking
If customers can combine a 20% off code with a free shipping code and an automatic 10% off, your margins evaporate. Think carefully about which discounts can stack and set combination rules accordingly.
4. Generic codes that leak
Codes like SAVE10 are easy to guess and share. For exclusive promotions, use unique, randomised codes that cannot be guessed or widely distributed.
5. Not tracking ROI
Many merchants run discounts without measuring whether the promotion was actually profitable. Always calculate whether the additional volume generated by the discount outweighs the margin you gave up.
6. Discounting as a default strategy
If your store relies on discounts to hit revenue targets, something is fundamentally wrong with your value proposition, pricing, or marketing. Discounts should be tactical tools, not permanent fixtures.
The best discount strategy is one that trains customers to buy at the right time, not to wait for the next sale. Use discounts to reward behaviour you want to encourage, and limit them enough that full-price purchases remain the norm.
Andrew Simpson, Founder
Setting up discount codes on Shopify is straightforward. The real skill is in the strategy — knowing which type of discount to use, when to deploy it, and how to measure its impact on your bottom line. Start with clear objectives, set sensible limits, and always track performance.
If you need help building a more sophisticated promotional system or want to integrate your discounts with your email marketing strategy, get in touch. We can help you create a discount framework that drives growth without sacrificing margins.
