In the world of consumer retail, the pressure is always on to move units and deliver on sales targets. In such a competitive environment, is discounting your products a good strategy, or is it merely a race to the bottom that erodes the value of your brand?
The downside of a discount
Discounts can offer a quick boost in sales, but over time continual price reduction can damage public perception of your products. Here’s a few ways discounting can be to your detriment:
It doesn’t add value
Discount offers may help your brand stand out during the promotional period, but it fails to add value to your products. If the only reason a customer is buying your product for the discount, they are unlikely to become loyal customer in the long-run.
Lowers brand reputation
What’s the difference between an iPhone and a lesser-known smartphone? Technical achievements aside, iPhones enjoy a hugely successful reputation, rarely lower their prices and turn billions in profit. For Apple, building a strong brand has been a much more successful strategy for growing sales.
It can be hard to stop
Continual discounting of product and services can become endemic to your business. Not only are you removing value, you’re reducing capacity for growth, as the business becomes fixated on volume rather than profit or long-term success.
It can upset returning customers
Keeping customers coming back means more than just discounting and sale times. In fact, when returning customers see items they purchased previously on sale, it can create an uneasy relationship between your brand and returning customers.
The solution: Get creative
Some bigger players might be able to absorb the losses on discounting, but for most businesses it’s important to find more creative and engaging ways to entice purchases from your customers.
The best rewards are exciting aspirational, appeal to your target market and have a perceived value by your customers.
Upselling works. Related products are the best kind of upsells, and when it comes to online sales this comes down to intelligent decisions with your eCommerce platform. In store, it comes down to a combination of staff expertise and product layout in store.
For example, Australian menswear brand Mr Simple stocks wallets, socks and hats near the counter for quick purchase. They also layer jackets and woolens over shirts on hangers upsell by helping you ‘shop the look’.
2. Offer a gift with purchase to add value
Reward your biggest buyers with specialised rewards tailormade just for them. Digital rewards that target specific dollar amounts for purchases work well. You could offer an experience that everyone loves – like movie tickets or a Good Food Restaurant Gift Card. This allows your customers to associate your brand with their experience outside of the transaction, enhancing their positive feelings towards the brand.
Offering gifts that relate to the product purchased an also be a good incentive for customers. For example:
- A gift card for the purchase of peripherals like a mouse, bag and extra battery when purchasing a laptop.
- A free month of groceries delivered on the purchase of a new fridge.
- A promotional branded sports bag with the purchase of vitamins and supplements.
3. Future-use rewards
Encourage customers to spend a little more by offering them an incentive on future purchases. For example, if they spend $50 today, they can get $10 off their next purchase of $50 or more. That means they’ll be encouraged to spend with you again in the near future.
4. Offer an original product
Many brands have seen success with returning customers through offering a unique branded product as a gift with purchase. For example, a promotion by Rinnai offered a unique ‘Rinnai Drone’ for customers that purchased a Rinnai infinity within the promotional period. It was a great success, with sales for the Rinnai Infinity being the highest since 2012 – and the company even struggling to keep up with demand.
The gift that keeps on giving
Rewarding your customers is the best way to retain their loyalty. It’s also a great way to attract new customers. Rather than devalue your brand with endless discounts, offer rewards, prizes and value-add. Delight your customers, and they’ll reward you in return.