Why you should move away from discounts and cash in on genuine customer connections instead

Recently, there’s been a lot turbulence in ecommerce. From pandemics and shipping delays to privacy updates and rising inflation, ecommerce marketers have had their playbooks rewritten. 

As every new hurdle puts pressure on your margins and your ability to grow your business, it can be tempting to lean on promotions and discounts. But our research shows that there’s an opportunity to do things differently. 

Customer expectations are changing and so is the general opinion about discounts. To drive growth, protect your profit margins and beat customer expectations you have to form long-term emotional connections instead. These emotional connections will encourage shoppers to return to you more often, securing you sustainable revenue.

In this blog we explore how today’s shoppers feel about discounts and why you should be focussing on creating genuine customer connections instead. 

Customer confidence is low

Consumer confidence is being regularly hit by worldwide economic factors such as inflation and rising interest rates that create spending uncertainty. Evidence from the British Retail Consortium (BRC), suggests shop prices rose in February of 2022 at their fastest rate in more than a decade as the cost of living crisis intensifies. Retail price annual inflation accelerated to 1.8 per cent in February, the highest rate of inflation since November 2011. Inflation in food prices is the main contributor, but the increase was also driven by non-food items such as cosmetics and furniture. 

Rapid price rises have left customers pessimistic about their finances with consumer confidence falling to its lowest level since January last year, when England entered its third lockdown. It’s now more important than ever for retailers to create genuine connections with their customers to build better engagement and increase their lifetime value (LTV). 

For many ecommerce brands, the natural response is to continually run promotions and sales, keeping customers coming through the door and avoiding an overload of stock, but leaving the traditional sales calendar null and void. 

Consumers are being more selective

Consumers are becoming more discerning about the brands they shop with. Instead of looking for cheap deals, shoppers are prioritizing brands that align with their values. Our research has shown that over half (56%) of consumers believe that brands care more about selling products over supporting causes or living their values, disappointing given the rise in conscious consumerism. 

But, brands like Patagonia, which has always marketed itself as a for-the-environment retailer, have recently spoken out about businesses greenwashing and inflating their sustainability efforts to attract consumers. Retailers should be aware that without evidence to their claims, focusing on conscious consumerism can have the opposite impact on shoppers. In 2011 Patagonia issued a full-page advert in the New York Times urging customers to rethink their Black Friday purchases, even at the risk of missing out on extra cash. 

An example of how Patagonia issued a full-page advert in the New York Times urging customers to rethink their Black Friday purchases, even at the risk of missing out on extra cash.

Today, as a result of the pandemic, consumers are definitely rethinking how they spend their money. Many see membership to a private community of like-minded shoppers or the opportunity to give to a charity as key influencers on where they shop (54% and 62%). Lowering your prices is no longer a good way to drive sales. Customers are demanding much more. 

A statistic showing what makes consumers feel positive or very positive about a brand - one of the reasons why businesses should focus on building genuine customer connections.

The outdoor clothing brand, Zorali, have embraced a variety of features to craft an engaging loyalty program that is true to their brand. Key to their overall strategy has been creating an emotional alignment with customers and providing rewards related to their environmental initiatives. 

A screenshot of Zorali's landing page. The brand has embraced a variety of features to build stronger customer connections.

When you redeem Zorali’s Treekeepers Rewards you are contributing to Zorali’s efforts to give back to the planet. 

At the Forest Guardian level, by leaving reviews, referring friends and buying products, you can plant up to 50 trees. In return you’ll also receive 10% off across the store and access to exclusive content and rewards. And at their Forest Custodian level you can plant up to 100 trees and you’ll also get to test out and keep Zorali’s newest products. 

An example of Zorali’s Treekeepers Rewards, which help the brand build stronger customer connections.

Shoppers are demanding more 

Shoppers are demanding more than discounts. There is an increased desire for authentic customer service and opportunities to connect with brands on a deeper level. 

Our research has shown that over two-thirds (68%) of customers would be loyal to a brand if it shared the same values as them. Whilst, 66% of customers said they would join a loyalty program if they could create ongoing relationships with the brands they like. 

Today, discounts are an insufficient tool if you want to build a loyal customer base. If you want to build lifetime value and brand loyalty, you have to offer alternatives that connect with shoppers on a genuine level. This will allow you to create a positive feeling around your brand and motivate customers to return throughout the year. 

There’s a new opportunity to create positive sentiment

Our research has shown that aggressive sales aren’t actually beneficial for a brand’s bottom line. Businesses with modest and infrequent discounts are healthier than those caught up in a sale-driven approach that erodes CLTV with each year a customer shops at a discounted rate.

A graph showing LoyaltyLion's research on aggressive sales that aren’t beneficial for a brand’s bottom line.

There’s a psychological thrill that comes with saving money but customers can feel equally as good about brands that don’t default to discounts.

Customers also feel overwhelmingly positive about the various alternatives to discounts like free shipping, early access to new products and exclusive content. 77% of consumers feel positive or very positive about a brand that provides loyalty points redeemable against future purchases, while 55% of consumers value having membership to a private community. 

Ultimately, these positive sentiments equate to sales and the overall growth of the brand. Beyond discounts, these alternative incentives are a reliable way to build a diverse online community of individuals invested in what your brand has to offer. 

In conclusion

Relying on discounts isn’t sustainable if a brand needs to run them all year round. At a time when consumers are savvier with their spending, discounts still have a part to play in retailers’ day-to-day operations. But they don’t always bring in the kind of customers that turn into life-long brand Insiders.

Shift your focus from discounts and concentrate on the alternatives that promote positive sentiments to a brand and drive sales, such as loyalty points and rewards or free shipping. In the end this will reduce your brand’s reliance on discounting and help you build stronger, long-term customer relationships that keep profits high all year round. 

To learn more about loyalty programs and the value of genuine customer connections feel free to download “The Discounting Playbook”.

The Discounting Playbook: How to cash in on genuine customer connections

About the author

Fiona Stevens

Fiona Stevens is the Head of Marketing at LoyaltyLion. Fiona has over ten years’ experience in Marketing, having worked in-house and agency side across functions including PR, SEO and content. She has specialized in loyalty for retail and ecommerce brands for the past six years.

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