Weaning Your E-Commerce Brand Off Discounting
The recent global pandemic has dramatically changed the e-commerce laWe all know the power that discounting has for driving sales. Within email marketing, it’s been reported that 7 out of 10 people reported using an emailed discount within the previous week. Clearly offering lower prices is going to bring people in, and consumers are actively looking for opportunities to get a deal.
But what if you’ve become addicted to discounting? And more importantly, what if your customers are wise to your discounting tactics?
As Entrepreneur reports, there is a dark side to discounts. The discount price may in fact be the true price of the item. If consumers start to realize that fact, then your brand’s integrity can be affected.
Here are some subject lines of emails received in a two week period from the same brand:
- Want 50% off.
- 30% off – ends tonight!
- You’ve unlocked a bonus discount
- Flash sale – ends midnight
There is something of The Boy Who Cried Wolf about the insistence that these discounts end soon. You know that in a couple of days at most, there’ll be some other discount. The discount incentive has lost all power, and the value of the brand has been diminished.
But for marketers facing a short term gap in their sales targets, discounts can be a great way to hit those weekly sales figures. But is it damaging in the long term?
Marketing Week recently wrote about brands that were trying to get themselves off the constant discount cycle. In it, Superdry and Gap were both mentioned as brands who saw some of their brand value (and margin) erased by self-inflicted discounting problems, and were taking steps to get away from this vicious cycle.
At Ometria, we don’t think that retailers should stop discounting altogether. We think that retailers need to be more intelligent about discounting and use it more strategically, rather than doing frequent batch-and-blast emails with blanket discounts to try and get a short term boost in revenue. But how can you wean yourself off this discount cycle, or avoid the trap altogether?
One option is to straight away switch your discounting approach from blanket sales to all your customers, to a reward for your most loyal shoppers. If you have a dedicated loyalty program this can be the mechanism by which you deliver these rewards. But even if you do not have a program, you can identify your most valuable and loyal customers and you can still target them with special discount codes.
This has the benefit of providing incentives for customers to become long-term customers and to buy more frequently. This provides you with the benefits that come with discounts but in a more limited and targeted way. And, this approach is more likely to lead to further repeat purchases from your loyal customers.
Another option is to only offer discounts to shoppers who refer their friends and family. The benefits of referrals are well known. People are more likely to buy if they’ve had a personal recommendation. Plus, as an e-commerce brand, you can get an extra customer for a relatively low acquisition cost – all while increasing your connection with the existing customer.
If you still have a need to get rid of stock, or boost sales, then limit your sales period to a specific timeframe and you can still get rid of stock. This is nothing new, with Black Friday, Christmas, January, Summer all being known times for sales. But, if you pick both a very specific time, and one that is thematically linked to your brand, you may be able to offer smaller discounts and get more attention paid to those discounts.
Take Elvie, a brand focused on motherhood. For Mothers’ Day in the UK, the brand offered a discount over this period. Elvie knew that this holiday is not a common occasion for discounts, but it’s one that fits very closely with its brand purpose. It’s not the biggest discount you’ll ever see, but a rare 10-25% off is very welcome if you’ve got your eye on one of their products you’d otherwise be paying full price for.
We recently created a case study with furniture retailer Cox & Cox. The short version is that email engagement had dropped off, and rather than simply offering a discount, Cox & Cox wanted to do something differently.
They focused on customers’ life cycle stages and preferences for certain categories. Then they sent dedicated and personalized recommendations as part of a broadcast campaign. The results spoke for themselves, with conversion rates increasing as well as average order value. For the results breakdown and the full story, read the case study here.
Adding Value Over Cutting Margins
Free shipping is in essence a discount, disguised as adding value. But with shipping costs going up and supply chain issues, free shipping thresholds are becoming less desirable for retailers to offer. So what can retailers offer to provide a better experience?
Well, if you’re shipping things anyway, why not include a free gift? The marginal cost of shipping something extra is small, and if the alternative is throwing it away or storing it, you might find it’s worth it to send it for free. The amount it delights your customers may pay for itself!
Try to think about ways you can add value to the transaction for the customer so that they get a little bit extra for their money. Charity donations are another way to add a degree of value.
Think About Where You Offer Discounts
If you are a multichannel retailer with an online store and physical stores, then an option is to only provide discounts in one of those places. Perhaps you want to drive more traffic to your e-commerce store, then it makes sense for discounts to be online-only.
Alternatively, if you can offer very specific category or product based discounts and target those to customers with affinity for those ranges, you can avoid site-wide discounts. This allows you to attract customers focused on those categories and products to your site.
Look At the Data
The balance between the short term gains of discounting and the long term downsides to constant discounting is a hard one to strike. To grow constantly and consistently, retailers have to build loyalty with their customers. When you look at customer data, there is a key purchase number that really increases the likelihood of a customer staying for the long run. This might be the second or third, or even fourth purchase, but there is a tipping point where customers are more likely to shop again than not.
At that point, retailers should be doing everything they can to get customers to convert, including discounting. But more than that, they should be looking at what gets customers to purchase outside of sales cycles, and trying to replicate that at scale.
The important thing is to stay strong and think about the long term goals of your e-commerce brand. Some brands have maintained their brand value by never ever discounting. Others have managed to do it more carefully. Sometimes a surprise discount will give you the results you need. But if you find yourself constantly reaching for the discount button, then it loses its power.
To find out more about how Ometria helps e-commerce businesses build a dedicated plan to increase customer retention, read up on our Retail Success Model here.
About the author: Iain is Senior Content Marketing Manager for Ometria. Over 10 years of looking at the retail marketing landscape, Iain has always been interested in studying how retailers use technology to better connect with customers and drive their business forward at the same time. He currently lives in South London.