Online strategy: to discount or not to discount?

There is no doubt that the credit crunch, and the recession that followed, has changed consumer behaviour…possibly forever. With less disposable income and greater insecurity, consumers are more price aware and value driven compared to the pre-recession days.

As a result, there has been a significant increase in the use of discounting by retailers, restaurants and other establishments most likely to be hit hard by a reduction in consumers’ disposable income. Traditionally considered a method of clearing stock, discounting has now grown to be a significant element to online marketing strategy perhaps best highlighted by the number of printable vouchers available from sites such as Money Saving Expert, Twitter feeds and development of smart-phone applications, such as the brilliant Vouchercloud.

With that in mind, what should you consider when incorporating discounting into your online marketing strategy? Here are a few ideas to get you started…

Be sure not to alienate existing customers when trying to attract new ones
With premium fashion brands for example, existing customers feel a sense of exclusivity in wearing a particular line or item of clothing. When discounting, you potentially open yourself up to a wider audience in the short term but it needs to be considered if these are the customers you actually want. The worst thing you can do is alienate existing customers by destroying the exclusivity associated with your brand.

If looking to attract new customers, consider how to build long term relationships with them
Ensure you offer newly acquired customers an incentive to come back. Consider how to collect data so you can engage with newly acquired customers again in the future. Request that they join your social networks for further offers and add them to your mailing list, for example (the latter with their permission of course). Any promotional efforts should be aimed at developing ongoing dialogue with new customers because as the old adage says, it is a great deal cheaper to market to existing customers than it is to find new ones.

Ensure there is good reason to discount
In the minds of the consumer there should ideally be a compelling reason for you discounting. If you discount too frequently customers become conditioned to associating your brand with cheaper prices; far from ideal if you sell premium products at premium prices, for example.

Consider developing a promotional calendar around key events of the year that are associated with your products. A simple example might be having a sale on ladies dresses and hats around Royal Ascot to attract new customers.

Ensure the message is consistent across all channels
Consumers increasingly demand, in fact they expect, the ability to connect with your brand across a number of channels…seamlessly. You must therefore ensure that the promotion is timed to hit all channels, and therefore customers, simultaneously whether they are on your website, following you on social networks, using your mobile app or of course, in-store.

The flip side to this is of course, is that you can use certain channels as a means of creating exclusive offers for customers, for example discounts for those that follow you on Twitter or Facebook. Better still, create a viral element to this and you could rapidly increase your followers and therefore potential customers.

Be prepared
Once the strategy is in place, ensure the business is prepared for the uplift in sales you can expect. Are you well stocked with sale items both in-store and online, do you have appropriate staffing levels in place and importantly, are staff fully informed of the promotion? I had an amusing experience in a Brighton restaurant recently when I showed the waitress a voucher….on my iPhone using the marvellous Vouchercloud app. The poor waitress looked at me like I was mad – clearly she has not been informed that hungry punters may start waving their iPhones when the time comes to settle the bill!

Measure, measure, measure
Make sure you set objectives, establish KPI’s and put appropriate tools in place to measure results during the discounting period. This is especially important if the offer is promoted online but designed to drive the visitor in-store. Printable vouchers or the use of a mobile application can help you join the dots between different channels.

And finally…
Always ensure discounting is part of a well thought out online marketing strategy. When times are hard and you’re looking to increase sales, the traditional port of call is usually a reduction in price. Consider all of the above before resorting to price reductions to ensure you not only sell more products but you do it profitably and with long term customer acquisition in mind.

Have you adopted discounting as part of your online strategy? Has it worked as effectively as you hoped? We’d love to hear from you with your experiences.

One response to Online strategy: to discount or not to discount?

  1. Ben,

    You wrote: “In the minds of the consumer there should ideally be a compelling reason for you discounting.”

    Are you advising that the seller should explain why they are giving away a product for less than its worth? That’s a discount, right?

    The reason for discounting is too often a sense of desperation. Or a lack of knowing what else to do to draw in shoppers. While sellers can try to spin a story that justifies the discount, I think in today’s world the sophistication of shoppers is such that they see it for what it is: desperation or lack of better ideas.

    I’m helping to create a course that addresses this very topic: how to sell online without discounting.

    You also wrote: “If you discount too frequently customers become conditioned to associating your brand with cheaper prices…Consider developing a promotional calendar around key events of the year that are associated with your products.”

    Reply: Doing discounts around major holidays or recurring times of year seems like a way to condition shoppers. Can it be avoided, this conditioning of customers? It seems a very hard thing to avoid.

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