With the agenda launched for Performance Marketing Insights: Europe, PerformanceIN is looking to some of the digital experts set to take the stage in Berlin this June. Ahead of her session, 'Attention to Retail', RetailMeNot's Anne-Marie Schwab explains why there's more to vouchers than meets the eye.
In recent years, we have witnessed a drastic change in consumer shopping habits, and retailers need to develop new strategies to retain customers whilst ensuring they make a profit. Especially amongst millennials, consumers are faced with balancing rising living costs with spending habits and are increasingly worried about spending too much on their shopping – whether that is for groceries, apparel or accessories. Buying at the best possible price has become the ultimate goal - even in cases when this is not necessary – leading to the phenomenon now known as ‘savvy shopping’.
Whilst consumers are challenging themselves to find the best price, retailers face the challenge of standing out in a saturated online market, where competition amongst pure-play and multi-channel retail retailers grows fiercer each year, accelerated by the development of hard discounts, the diminishing sense of loyalty amongst consumers and the pressure to expand into international markets – creating added competition globally.
‘A little nudge’
For a long time – especially amongst grocery stores, retail chains and online stores – ‘deals’ meant reducing stock to clearance or special 2-4-1 offers. These short term sales for certain products are without doubt efficient, but they also have their limits: clearance sales don’t necessarily have the same impact today as in the old days when shoppers had access to cheaper goods year-round. In addition, blanket discounting measures provide the same discount to all shoppers, when some of them are not even looking for it and are ready to pay the full price. Retailers need to ask themselves whether their discounts would be better placed, therefore, only offered to those who need a little nudge to make a final purchase.
It is this thought process which makes vouchers a fantastic asset to retailers who want to thrive in this ongoing price war. And this idea isn’t new; the first ‘voucher’ was used in 1887 when Asa Candler offered shoppers hand-written tickets, entitling them to a free bottle of his latest drink: Coca-Cola. Over the past 125 years, the voucher market has grown and the UK is now the third biggest market globally for grocery vouchers, behind the US and France.
The battle intensifies
The reason that vouchers are enjoying this level of success is because they solve real issues for both retailers and for consumers. The main concern of today’s savvy-shopper is: is the price right? In fact, consumer trust levels for brands – and more specifically pricing – have reached a point where the large majority of consumers now feel that a product sold without any discount is too expensive (CCM Benchmark). With the rise of e-commerce and recommendation sites, the price battle has become even more intense as consumers can now easily compare prices and find the best offer. Retailers now need to provide consumers the assurance that they are getting a great deal and that they therefore have the resources to buy more, and more often.
The digital shift of recent years has also made its effects visible in the voucher market. By using single-use codes online, retailers can move away from mass products and provide personalised offers, perfectly adapted to their targets and therefore much more impactful from a consumer standpoint. The digital shift has also made the voucher a great lever in an omnichannel strategy. Historically, bricks and mortar retailers feared that e-commerce would cannibalise part of their business, but vouchers are a great bridge across the two, acting as a tool to capture of the web audience and – particularly through mobile – drive footfall in-store for the final sale. This also provides retailers with the opportunity to evolve their multi-channel strategy to incorporate dynamic pricing models, where they can adjust prices to the current demand and maximise revenues.
With this in mind, when used intelligently, vouchers can truly help retailers improve their brand image. Research from Forester and RetailMeNot in 2014 found that 68% of consumers believe vouchers have a positive impact on how they view a brand if that brand is offering vouchers. In addition, against common belief, targeted promotions for products or categories will not lower the margin of the retailer, but rather will increase revenue by increasing the number of site (and store) visits and average order value.
With online expected to account for 15.2% of all consumer retail spend in 2015, and with shoppers increasing their appetite for a good deal, retailers should be intelligently harnessing the power of vouchers, their power to drive incremental sales and to take the challenge of the modern shopping ecosystem and turn it into a profitable opportunity for retailers.