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Breaking the Perpetual Discounting Habit
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Breaking the Perpetual Discounting Habit

The busiest retail period is fast-approaching. The relentless Christmas shopping schedule puts retailers and consumers through their paces, with stores ruthlessly competing on price to encourage shoppers to visit their stores. But this is by no means reserved for just the Christmas period; it’s a habit that retailers are constantly indulging in.

The ‘discounting habit’ is one that’s fuelled by bargain-hunting consumers, who have come to expect deals on a large number of branded products. The rise in popularity of voucher codes and price comparison sites, have equipped the modern shopper with valuable (quite literally) intelligence that can be used to demand the best possible price from retailers.

The pressure on retailers to join in with this perpetual discounting is a habit that is in danger of becoming an epidemic among the retail community. The long-term impact that consistent price reductions can have on consumers’ perception of a brand is something that should be seriously considered by marketers as consumers will start expecting more for less.

In the run-up to Christmas, I want to look at how retailers should be approaching their discounting strategy and what they can do to draw shoppers towards that final purchase.

How voucher codes have bridged the gap between online and offline

Research from Tradedoubler, conducted earlier this year, found that 44% of consumers use a voucher code on their mobile phone when shopping on the high street. This is symptomatic of a generation of consumers that are fixated on price rather than a particular brand.

But it shouldn’t be viewed negatively by brands. The use of voucher codes can act as an accelerant; teasing shoppers into the store and enticing them to complete that final purchase. Although voucher codes are online incentives, they can help drive footfall to the retailers’ physical stores too.

Voucher codes are the current bridge between the online and offline world. Our research found that 51% of mobile shoppers search for a voucher or discount for a product they have previously seen in-store. By providing that voucher through a mobile-enabled partner, retailers can provide a mechanism for consumers to find the deal they want and transact immediately, increasing in-store sales.

So, the bridge between online and offline works both ways. On the one hand, consumers are tempted into the offline stores by the online voucher code, but on the other hand consumers can then search for codes or discounts having been to the physical store.

Why brands need to move towards data-driven discounting

Brands use consumer data to drill deeper into shoppers’ preferences. We have seen the success that companies such as Amazon have had nurturing consumer data and using it to offer tailored deals that are personal to each shopper.

It is important that brands treat each consumer as an individual when approaching them with discount offers. There are a number of factors to take into consideration, such as the location of the individual, gender, age and previous purchasing tendencies.

Data-driven discounting is not only more beneficial to the consumer; it’s also more efficient for brands to provide these personalised discounts, as opposed to casting a wide net. A channelled approach to discounting is also more effective in that the consumer is more likely to take note of an offer that is directed at their previous purchase history and tailored to a consistent interest in particular products.

Many publishers hold reams of consumer data and already utilise this data to personalise the consumer experience on their sites. That same data can be used to personalise discounts to particular groups of consumers.

How brands can assure their revenue (and reputation) through targeted discounting based on data intelligence

It is all about conversion. Using data intelligence allows retailers to engage with the consumer on a different level. As soon as retailers instigate a level of engagement from the consumer, they’re already on the path to purchase.

Performance marketing channels, such as price comparison sites and voucher codes, are usually the first port of call for price-conscious consumers and this is where retailers should be engaging with their customers. It is important that during the path to purchase, retailers keep the consumer interested in their products. The use of discounting methods should only form  part of the consumer’s journey.

If the consumer shows an affinity for discounts or if the consumer loses interest in the product along the way, discounting can be an effective means of retaining or regaining interest. However, where many retailers go wrong is in not understanding the consumer motivation and making discounts available to all consumers; including those who aren’t looking for them.

This is how retailers can break the perpetual discounting habit. By thinking intelligently about what the consumer is doing and likely to do, brands have a better chance of guiding customers to the checkout whether online or offline. In a sense, dropping perpetual discounting habits will help retailers towards a perpetual revenue stream, while protecting their brand.

The pressure on retailers to join in with perpetual discounting to win consumer share can run the risk of decreasing their recommended retail price (RRP) in the long-term. Voucher code discounts drive sales volume but when offered to the consumer too often, they build-up an expectance of the brand and the discount benefit can become diluted. Rather, delight your consumers with an intelligently thought out discount than encourage them to expect a discounted rate.

Brands must make sure that they use discounting correctly. Mass discounting is not only inefficient when it comes to driving long-term revenue, it can also have a negative long-term effect on the consumer’s perception of a brand.

A targeted, personalised approach to discounting is how retailers will assure and increase their revenue streams this Christmas, and in the future. Using consumer data in an intelligent way to really appeal to the shopper, will ignite an interest in the product on offer as well as a long-term engagement with the brand. As the world of discounting matures, retailers must reserve the ‘single event’ discounts to deliver secondary metrics (like clearing stock in a warehouse), rather than just driving month-on-month sales.

Andrew Copeland

Andrew Copeland

Andrew Copeland is Network Director at Tradedoubler UK. With over 8 years of experience in performance marketing, Andrew has worked with a number of brands such as Lloyds, Barclaycard, Toshiba and Mazuma Mobile, developing successful affiliate strategies to deliver against each clients’ objectives.

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