Loyalty Blogs

Why Brands should move away from discounts and Focus on Customer Connections

  • Posted on August 21, 2022 by natalia
  • Reading time about 5 minutes
customer loyalty program

Ecommerce is a turbulent sector, from issues emerging at the time of the pandemic, to delays in shipping, privacy breach and continuously rising inflation. The e-commerce marketers already have their strategies laid up. Every hurdle in the row can add some pressure on your working e-commerce business, with the constant flipping customer demand paradigm.

The only strategy which is widely followed and trusted throughout is providing discounts to the customers, undeniably it is a lucrative option, but does that pave any benefit in the long run? Or is it just the regular option almost every company is following? Let’s find out if loyalty management software has different strategies lined up other than just discounts.

Market Condition and Customers

To bring it your realization, customers are facing regular changes in terms of money. With certain economic factors contributing every day, the cost of living is increasing, and the rate of spending is going low. According to the British Retail Consortium, prices rose in February 2022 at their fastest rate in more than a decade as the cost-of-living crisis is intensifying. The retail price annual inflation increased to 1.8 percent in February, being the highest rate of inflation ever since November 2011. Though the spike in food prices is the major trigger in inflation but, the increase was also driven by some non-food items including cosmetics and furniture.

Seeing and analyzing the market condition, the rising prices have forced the customers to stay negative about their finances and keep their focus on savings rather than spendings. The best way to gel up with customers easily is communicating them the right thing. Customer connections play a vital role in today’s market scenario, more you build the right connection with the customers, better you have a chance to increase their lifetime value.

Why Discount should be the second choice?

Most customer loyalty software is offering discounted options for the customers, making it the age-old traditional way to lure more customers and get them onboarded. Let’s understand why discounting could be bad for business in the longer run.

· Value Misinterpretation

It’s an old saying that an item is only worth as much as someone is willing to pay. Considering this if the price is less than the actual or deserving value then the product will lose its true value. Customers can even stop considering the same product if listed undiscounted as they would develop a habit of seeing the same on discount.

· Expectation of Future Discounting

Customers once used to discount practices can later be expecting more as, after a point of time, every discount value seems lesser. However, your earlier offered discounts have already lowered the bar on the value perception and customers would be thinking why pay more when they can get the same product at a discounted price? Completely underestimating your future product selling opportunities.

· Decreases Profit Margin

If you’re selling a product at its full price, you will understand that the margin on the same will be much higher than if you’re selling the same at discount. So, the margin you’re losing because of offering frequent discounts could be used for your future opportunities, causing you to lose a lot.

What Better could be offered?

In a huge pool of customer retention tactics, there’s a lot you can get, and a discount is certainly not the last door to knock on. Talking about other options, the cashback loyalty rewards program could be the right thing to go with as it is not a discount but only a certain amount which is decided as per your brand spending convenience can be credited back to the customer’s account. This seems a perfect combination of the right business strategy and profit margin at the same time. here are a few other factors to be considered at the same time-

· Keep the Value Intact

It’s always you who have to take good care of your brand reputation and product value. Do not underestimate your products and even overstate the same. The best way to keep your product value unaffected is to stay confident in the pricing. The cost you set for your product or service should directly reflect the product relevance, your budget, the effort involved in the same, and the time invested to calculate an ideal value for money.

· Stay Within the Designated Budget

If your preset budget says a value x, better not to provide any discount/offers/cashback that hampers the preset value. For instance, if you have a value decided for 500 which includes your overall cost and the margin, it is advisable that you do not provide the same without adding in your slight margin, or the discount percentage should be set according to the ROI and other profit margins. Make sure you do not hamper your actual costing, else it would make you lose a lot going forward.

Final Words

It’s the time when brands should shift their attention and focus from regular discount offers for their customers and dedicate themselves to making the right customer communications. So, there can be tons of other alternatives to discounts rather than hampering your product value in the longer run. Get started with a customer loyalty program or a loyalty program software exclusively for your business so that you can communicate the right things to your target audience.

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