For the past 2 years, customer searches for vouchers during their online shopping has boomed and, to meet this demand, more and more advertisers now provide discounts, vouchers and promotions. But is customer demand the only factor that an advertiser needs to take under consideration when deciding if and what to offer?
Customers have always looked to buy goods cheaply, especially when shopping online; it’s the nature of customers, as well as the internet. Price is a big decider when choosing what and who to buy from and offers fulfil this exact need. An online shopper will research a product, go to a price comparison site, and then look for a voucher or a reward scheme to get it even cheaper. Advertisers have been issuing money off vouchers, offers, product promotions, free delivery offers, sales etc since the dawn of websites – as a means to activate & retain customers. But the surge in demand has meant that advertisers are faced with an increased pressure to provide even more of these customer incentives and more frequently.
One of the benefits of engaging in customer incentivisation is that the customer feels they’ve bagged themselves a bargain. Upon doing so, and as part of the social aspect of the web, they share these with their friends and the advertiser gets exposure to a much bigger audience who they might not have approached normally. Moreover, with the surge of the promotions aggregators and the loyalty sites, brands now are able to reach out to price savvy customers who need that little bit extra to be persuaded to shop from them.
The Value of Customers
But the question arises – are these customers of value, do brands need these customers? And, what price are they willing to pay to get these customers? Are they potentially devaluing their brand by engaging in these practices? These are not easy questions to answer. A sale is a sale, for a lot of these advertisers. In dire economic times, merchants will take whatever they can get. And, yes, a sale is a sale, but costs need to be controlled and brand image retained, regardless of the economic situations.
Advertisers need offer sites and loyalty schemes; but these publishers also need the advertisers – so they must work together to approach the right customers with the right offer. The first step to correct handling of this channel is to analyse the long term value of those customers: are they shopping again, spending more, acting as brand ambassadors unprompted? Or are they always in need of an incentive to engage with the brand? In other words, do they manage to acquire the customer the customer at some point, or will they always have to give up margin trying to retain them? Will these customers ever pay full price?
Instruct your customers; tell them how to react to the brand.
The answer to these questions is that customers will react with your brand in how you instruct them to react. If you offer incentives freely and across all channels, all your sales will end up including some kind of a discount.
- So, be selective of where and when you release vouchers: potentially publish less during your key trading periods, and more in lower times.
- Define how you use the incentives: to attract new customers, activate inactive ones, retain existing ones, initiate word of mouth? Each of these aims has a different incentive.
- Consider tying in the incentive with the desired action so that you can measure their effectiveness and conversion efficiently – if you know exactly what you want to achieve, you’ll know if you’ve achieved it or not.
- Set minimum spend or create product bundles, to increase basket value, therefore retaining margins – don’t give out discounts for nothing.
- Control their use – word of mouth is great, but do you want thousands of discounted orders, when you had only budgeted for a few hundred? So, put time limits, define how many times they can be used overall and how many times a single person can use them.
- Control distribution: are all your online channels allowed to publish them? Consider tying in the referring website or channel to the activation of the code – although you need to be careful for customer dissatisfaction.
- Do you need to work with all voucher aggregators out there, or a selection of a few will serve the purpose? Remember, you are using vouchers to incentivise not only the customer, but the online partner as well: you’ll have much better exposure if you offer them an exclusive offer that no other site has and achieve a much better response rate from those visitors.
- AB test various denominations to see what works better for your target audience: £5 off £50 might be the same as 10% off, but the response rate will be very different.
- If you’re considering offering discounts but are concerned on margins, increasing your prices is not an option; customers are looking for better prices, but not at any cost. Furthermore, if you see that offering discounts is your only way to compete on price with your competitors, it might actually be time to evaluate your pricing strategy instead.
For loyalty schemes, things aren’t as clean cut, as the main incentive provided is cashback/loyalty point. An indirect discount, which you don’t really control – you pay the scheme a commission and they define how much of that the customer will get (typically between 50-100% of that commission). And, on top of this incentive, advertisers are asked for extra discounts, so margins are very tight for this channel. With this in mind, advertisers need to put specific criteria over what customers they want through these schemes. To avoid cannibalising their existing clientele, they might offer incentives to new customers only, or higher incentives for them and lower for existing customers. Or only partner with these sites on specific periods and for specific campaigns, as part of their tactical marketing. And, always evaluate sales through loyalty schemes – don’t open yourself up to fraud either from customers placing orders solely to get their cashback by cancelling the order or from existing customers opening new accounts to qualify for the offers.
Incentives vs Brand Perception
The biggest question for advertisers is how these incentives affect brand perception – are they now viewed as a discount brand? For many, that’s the primary reason for no or limited activity. They are concerned of the brand association through those sites and are protective of where their brand appears. The solution to all these concerns is controlled and selective distribution. Choose the partners, choose the time period, choose the criteria, choose the target audience, choose the validity period, choose the message that accompanies the incentive. If you know who promotes the offer, where, who is approached, for how long and how it’s promoted, brands have actually more to gain. It’s the chaotic and constant discounting that is damaging the brand, not the discounting itself.