Over the weekend, the Institute of Promotional Marketing released new figures showing that retailers are still overly reliant on discounting strategies, with £40.4bn being spent price cut promotions per year (as against £14.4bn on value-added promotions). Gideon Lask, CEO and Founder of Buyapowa, tackles the problem of ‘dumb discounting’.
These figures from the IPM show that UK retailers are still far too reliant on heavy discounting strategies, despite mounting evidence they don’t achieve long term results.
Once upon a time a decent discount paid for itself in exposure but, with so much discounting going on, any real cut-through now requires margin-obliterating cuts of 80% or more. Even then, it’ll simply attract deal-hunters with no loyalty to your brand and no incentive to shop with you again. Unless you’ve got money to burn, discounting is dumb.
Businesses continue to take enormous risks in guessing which offers will gain the most traction, when social media now enables them to ask customers directly what they’d most like to see. When a customer asks for a deal and gets that deal, they’ve got ‘skin in the game’ and they’re far more likely to purchase when the deal goes live. That means not only a vastly improved conversion rate, it also means you can afford to be significantly less generous with your margins.
These kinds of smart rewards also work well when they improve – and keep improving – as and when customers do things like share deals with friends online. Word-of-mouth marketing is seven times more powerful than advertising so, by incentivising viral sharing (especially via social media), you can solve the cut-through problem in a single stroke.
By Gideon Lask
CEO and Founder
Buyapowa
http://www.buyapowa.com/