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Rather than nurturing the wrong type of customer, retailers should instead prioritise the long-term customer.
Rather than nurturing the wrong type of customer, retailers should instead prioritise the long-term customer.

Using data to break discount dependency and nurture loyalty

MARKETING NEWS

By James Glover - May 15th 2018, 16:36

Retailers have been discounting since the dawn of the grocery store. Brands relied on couponing and sales as an easy way to differentiate themselves from generic store-brand options and as a way to get consumers to make the switch from a competing brand to give theirs a try.  

This marketing strategy grew quickly, moving beyond grocery stores to retailers of all kinds. Today, retail is addicted to motivating shoppers via discounts — and consumers have become conditioned to expect a deal from retailers known for relying on this strategy.

However, attempting to reactivate customers through discounts is a sub-optimal approach. In fact, this price reduction strategy costs the retailers money and loyal, long-term customers, as they attract those price-driven consumers who are unlikely to turn into long-term loyalists. In fact, research has shown that buyers who purchase at a discount are unlikely to be as valuable as someone who purchases a product at full price since their motivation is, in most cases, solely price-driven. They will continually hunt for the best deal they can get, without loyalty to the retailer selling the item.

Yet, this reliance on discounts is quite widespread. A 2017 Coherent Path survey found that one-third of marketers said more than half of all emails sent include a promotion or discount. And a study on email effectiveness in which 138 top retailers' email programs were analysed, found that nearly 40 percent of all emails contained some kind of promotional language.

But discounts don't have to be the solution for cultivating loyal customers. Retailers must recognize that strategies to attract and retain customers with lower prices can be near-sighted as they fail to inspire valuable, long-lasting relationships. When a retailer unintentionally builds a reputation for continually offering discounts, brands train consumers to expect them. The result? They become unwilling to pay full price.

Rather than nurturing the wrong type of customer — the deal-hungry and disloyal — retailers should instead prioritize the long-term customer. With technology like machine learning and advanced analytics, retailers can use data-driven strategies to free them from relying on discounts and empower them to attract those long-term loyalists. Here are a few ways to do just that:

Understand the entire customer journey
Data derived from personalisation tools and machine learning technology can clearly indicate what consumers are already buying, and most brands outside of the grocery industry would agree that consumers are rarely buying the same items over and over again. That's why you should embrace technology that's designed to help you make sense of your data to understand how broad and deep you can go in the product catalog while maximising engagement. As a result, customers receive marketing messages with content, products and categories they are actually interested in, when they want them while you get to expose more of your product catalog to relevant audiences.

Prioritise what customers are interested in, not the brand
Rather than focusing on how your brand views your catalog or which products your merchandising team is interested in promoting, prioritise what customers are invested in and build a balanced content "diet" for each recipient. This customer-centric approach, made possible by the treasure trove of customer data you have, empowers you to tailor communications to different types of customers while keeping up with their evolving tastes and preferences.

Personalise communications to the individual
Research has shown that loyalty will increase if the initial sale is followed up with personalised engagement, guiding customers from being one-time shoppers to more frequent ones. That's why it is important to take advantage of technology that individualises communications based on the evolving tastes, interests and behaviour of your customer base. By focusing on providing the right pieces of content to consumers based on relevance to them, you can differentiate yourself from all of the other retailers trying to capture their attention, dollars and loyalty, by showing you understand them.

As consumers recognise your increasing understanding of them, their preferences and what's of most interest to them, their loyalty will grow – breaking them of the discount-driven mindset. Over time, you will cultivate more long-term customers who are not only eager to hear from you and learn what else you have for them, they're also willing to pay full price.
Retail Touchpoints 

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