Holiday Discounts Don’t Necessarily Lead to Loyal Customers — Here’s Why
This post is the latest in our “Holiday Blitz” series. It’s our editorial focus for the month of November, including topics holiday shopping behavior, year-over-year trend analysis and retail strategies. See the rest of the series here.
Who hasn’t been motivated by a discount? As Black Friday nears, retailers are sending more emails promoting limited-time sales than ever before.
Surveys show that these types of messages work, at least to a certain extent. In its 2019 Holiday Marketing Guide, Yes Marketing found that compared to other sale-centric holidays, Black Friday emails were opened the most at 12%, besting both Green Monday and Cyber Monday. Holiday email campaigns have become ubiquitous among the country’s largest retailers, with more than a quarter of all Black Friday messages now sent before November 19.
Those statistics are encouraging to retail marketers, but they might not tell the whole story of what happens when brands focus their holiday campaigns on discounts and cash-back promotions. When brands go in on discount-focused events like RetailMeNot’s Cash Back Day, which was held earlier this month, there’s concern that the long-term impact might be negative and that brands might be training customers to expect discounts. That expectation can reduce the perceived value of the brand’s products, and it can diminish brand equity over time.
“Cash back incentives are transactional and don’t motivate the customer to continue shopping with the brand,” says Nicole Amsler, vice president of marketing at Formation, an AI-powered marketing platform. “These events also aren’t beneficial for building lasting loyalty.”
One thing we know for sure is that shoppers love a deal. Discounts and coupon codes can spur almost any shopper to get off the couch and head in-store. Brands are banking on those shoppers picking up a few extra items as they wander through the aisles, and returning to those same stores to pay full price once the holidays are through.
The rising rate of online shopping is throwing a wrench in that time-tested strategy, though. According to a report from OpenX, the number of consumers planning to shop online vs. in-store on Black Friday is nearly identical for the first time ever. On Cyber Monday, 70% of millennials plan to shop online, which is an increase of more than 30% over 2018.
Amsler says that discount shopping events are an investment for brands. But if shoppers aren’t coming into stores and purchasing add-on items while they redeem their coupons, that’s not helping brands grow the long-term value of their customers.
“Transactional offers are not customer-centric,” she says.
In addition to not being customer-centric, transactional offers are also inefficient. That’s a major challenge for brands and retailers. By offering blanket discounts and treating all customers the same, retailers could potentially be leaving money on the table. For example, while one person may require 25%-off to make a given purchase, another may only need 10%-off or no discount at all.
“During the holidays, people are already planning to shop and often have an idea of what they’re going to buy. Offering a discount on something a shopper would have purchased without a discount is inefficient and conditions shoppers to expect those discounts,” Amsler says.
In Amsler’s view, the long-term negative effect on the brand isn’t worth the short-term bump in traffic. Although discounting merchandise may get people in the door on a given day, it won’t bring them back, and Amsler has seen brands that were focused on acquiring new customers lose out when they are not focused on retaining those customers, as well.
Instead of relying solely on cash back events and discount promotions, Amsler believes brands should be prioritizing customer experience and targeting their deals toward specific groups of consumers. Technology can make this easier, although it may be too late for brands to adopt entirely new personalized marketing programs at this point in the holiday season.
“I think a customer-centric strategy will be key to building stronger, long-term relationships with shoppers,” Amsler says. “Shoppers have an increasing number of options when shopping, so brands looking to build these long-term relationships will need to form offers that are personally tailored for greater engagement and stickiness.”
Stephanie Miles is a senior editor at Street Fight.
