Everybody loves a deal, which is part of the reason why email marketers offer them so often. And discounts can indeed boost key metrics, at least in the short term. An Experian study, for instance, found that email campaigns which offered coupons had a 14% higher unique open rate, 34% higher unique click rate and produced a 27% increase in lift. It’s not hard to see why marketers rely on reduced pricing. But discounts come with serious drawbacks, and are not as necessary as they once were thanks to new developments in data-science and personalization.
Discounts train customers to wait for promotions
As Entrepreneur.com points out, predictable and frequent discounts can train customers to wait for discounts in order to avoid paying full price. Over time this can erode your profits and cause people to perceive your brand as low value. What’s more, relying on discounts can force you into a race to the bottom with your competitors. In this scenario, only those with the deepest pockets and superior supply-chains — think Wal-Mart — stand a chance in the long term.
Loyal customers are indispensable, but discounts don’t attract them
The following often repeated statistics deserve to be repeated: 65% of a company’s business is derived from existing customers and it costs five times as much to attract a new customer as it does to keep an existing loyal one.
While it’s true that discounts can help attract customers, they aren’t your best bet for keeping them. Indeed, our study on Cyber Monday found that discounts tend to attract disloyal customers who don’t make repeat purchases. Clearly, it makes sense to keep an eye out for alternative methods for attracting and engaging customers.
Reveal the path to purchase by understanding the customer journey
Understanding the customer journey can enable you to identify the products your customers love and are willing to buy at full price. Here, we should specify what we mean when we say customer journey.
A customer journey refers to the trajectory of a given customer through a transactional space. Intersecting with this trajectory are various products. These are the products the customer is on a path to purchase. If you know which products intersect with the customer’s trajectory, you can identify the products a customer will purchase.
With this information, you can then offer customers the products they actually want to buy when they want to buy those products instead of hoping to win them over with constant and generous discounts. Sound complicated? Don’t worry: our Campaign Optimization solution does all of this
Discounts can lead to nasty effects like:
- Training your subscribers to wait for the lowest price point
- Causing subscribers to perceive your brand as low value
- Engaging in a race to the bottom with your competitors
Yet discounts are used because, at least in the short term, they work to boost metrics by which marketers measure success. These metrics can be shortsighted. It’s better to offer customers products that interest them without the need for a discount. Understanding and optimizing the customer journey enables you to produce significant and sustainable lift in key metrics and lifetime value.