The Tailspin – Are Discounts Eating Into Wallet Share?
Discounting is a reactive tool to primarily drive volumes. You end up catering to numbers (vanity) while neglecting revenues (sanity). With each discounting campaign, you are leaving some part of the customer’s money on the table.
Studies have shown the additional wallet share not necessarily mean the customer is buying more volumes. That means the customer is left with more in their wallet – which they are spending with your competition or other categories you don’t serve.
What does this mean to your loyal customers?
- Trust deficit
- Changing their purchasing behavior i.e. plan shopping during discounts.
- Losing focus from WOW experience to ONLY pricing
If this is the case, why is discounting still an accepted practice?
- Sale to coincide with holiday or event React to a competitor
- Match sale numbers to prior period
- To a limited extent, the first point of coinciding with a holiday or event is focused on the customer and can still be partially excusable. The others are simply NOT. They MUST stop. PERIOD,
So what can single or multi-brand retailers do to offset the sales deficit that can likely happen because of a cessation of discounting? Run Stackable Programs.
Pray, tell me what are stackable programs?
Reciproci stackable programs address these enabling retailers to run programs that reward loyalty points to provide the uplift required. The Reciproci stackable programs enable the retailers to personalize the programs based on:
- The specific set of stores for accrual and redemption
- SKU level
- It can be further fine-grained to drive traffic and marketing efficiencies as desired by a brand manager.
- This ensures the wallet share remains with you and proactively drive customer-shopping behavior. Let me illustrate with a real-world example in the words of our customer success team member:
“Buy One Get One Free is a 50% discount, right? Wrong! Learn how.
Reciproci powered stackable point program hit its purple patch with one of the large customers when the analytics reports revealed a “beyond expectations” increase in sales due to an innovative promotional campaign. This campaign not only drives the clearance stock volumes but also created an uplift in the new season volumes. We are happy to share with you the secret sauce of that campaign. Instead of giving a flat 50% cashback, the brand offered 50% of brand points credit back to the loyalty wallet. These points were redeemable against the same brand within the expiry date. Lo and behold, not only did the customer come back to redeem these points, they bought even more. Say, a purchase of $100 results in $50 in the original scheme. In the new scheme, $50 worth points were credited to the wallet. In order to redeem this, the customer ends up buying new stuff that is not on discount for another say, $180. So, the retailer has effectively given a discount for $50 for a purchase of 180, resulting in an effective discount of 50/280*100= 17.8%. The uplift for the new season volume has been 21%”
Loyal customers feel privileged and exclusive with the customer experience and the objective of driving volumes is also achieved.