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Loyalty Discount or Loyalty to the Discount?

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By: Clarus Commerce |

Posted on August 2, 2019

Chances are you have some affinity toward specific retailers, right?

You might have a favorite grocery store or pet store or clothing store. Maybe that’s based on location. It’s on your way home. Maybe it’s just a place that you’re used to. Or maybe it’s a website. After all, we’re creatures of habit. But what would happen if you got a coupon for 20% off at a similar retailer?

Assuming all other factors are about equal, you’d probably end up straying from the usual store to use that discount. Discounts are great for driving short-term transactions, but are they good at driving long-term loyalty?

Customers Still Love Discounts, but You Can’t Buy Loyalty

Transactional benefits like discounts are still important. That’s because they make consumers feel like smart shoppers. In fact, 76% of savvy millennial and gen x shoppers say an offer or discount is the largest factor in their purchase decisions.

Who doesn’t feel good about saving some cash or finding out that tenth sandwich is free, right? But there’s a problem with this. Every retailer does it. 52% of millennials said they’d switch from one major retailer to another for discounts of 15% or more.

When retailers offer similar products, coupons, and loyalty programs, customers are going to go where the discount is. Instead of developing loyalty to the retailer, they start developing loyalty to the discounts themselves, no matter where they come from.

You Have to Dig Deeper Than Discounts

Discounts alone aren’t enough to keep customers from shopping the competition. Many retailers have trained customers to wait for discounts to shop. And they shop where the coupon is valid.

32% of shoppers say they have abandoned a shopping cart online because they found a discount with a different retailer. In the Age of the Customer, it’s easy to switch brands. But customers that are truly loyal stick with a brand, even though they have unlimited choices, because they have an emotional connection. They believe they are getting a better overall value even if another retailer has a cheaper price.

Consumers with an emotional connection to a brand have a 306% higher lifetime value, stay with a brand for an average of 5.1 years vs. 3.4 years and will recommend brands at a much higher rate (71% vs. 45%).

Complement the Coupon to Build True Loyalty

No one is saying that promotions can’t be a part of your strategy. The premium loyalty programs we build offer instant discounts 24/7.

77% of shoppers say discounts can influence where they shop, and 48% say they can speed up the decision-making process. These benefits are what consumers are the most used to, and use the most, but experiential benefits are where your brand can really connect with them.

The key to offering great experiential benefits is making sure they make sense for your customers. What works for another retailer might not work for you. That’s where the opportunity to differentiate comes in.

REI does an amazing job at this by taking experience to a whole new level with REI Adventures. While Nike has done a great job enhancing the in-store experience for loyalty program members, REI takes its audience outside of the store completely.

By offering a series of outdoor adventures, REI aims to associate itself with outdoor expertise in general. While anyone can book a trip, these adventures are heavily aimed at REI Co-Op members and discounted substantially.

While consumers might be able to score a coupon at other sporting goods stores, they probably aren’t traveling to any Norwegian fjords with them. An experience unlike anywhere else. That’s what sets REI apart. That’s what builds loyalty.

Also Read: Brand Loyalty Survey: The Most Innovative Tech Brands

Where Does the Loyalty Lay?

If you want to pull consumers in, a traditional loyalty program can help. Transactional benefits are what attract most customers, but that’s because they are usually attracted to the discounts. And they will use them wherever they can.

When the aim is building true loyalty with devoted customers, they need to be offered a unique experience that isn’t available anywhere and adds value to their lives.

See why loyalty is more important than ever.

Do you want your customers to be loyal to the discount or loyal to your brand?

By Paul Wolfer
Paul works closely with the leadership team on strategic positioning, messaging and branding at Clarus. When he's not writing blog posts and telling the tale of Clarus, he can usually be found adventuring to breweries with his wife or catering to their three awful and adorable cats.