Retailers have under-estimated Discount Damage

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By: Wise Marketer Staff |

Posted on December 15, 2014

Every marketer knows that they will move product through incentives, especially during the holiday season, but what many don't consider is the downstream impact that discounting can have on a lifetime value, according to Neil Capel, founder and CEO of Sailthru, who here explains how retailers can develop a discount strategy for every customer that increases sales during the holiday season and encourages customers to stay for the long haul.

Discounting sounds like a good idea to entice customers and push them across the sales line, but it can be a perilous practice. While sales and special promotions for the holiday season can immediately boost sales and are often a necessity to responding to market dynamics, retailers can't afford to be selling at a loss.

It is therefore vital that retailers begin planning their approach now for the holiday season by testing which promotional model works for customers. Long term and short term testing will confirm which discounts are producing the desired effects and are enough to make even the thriftiest purchaser close a sale.

Throughout this testing process, retailers should be looking at what types of discounting are users responding to and via which channels - how does a 25% discount offered via text message perform compared to an offer is made via email? And which offers actually drive the best additional revenue? These are short term tests and will only confirm which discounts are producing the desired and immediate results.

These short term tests are not enough; marketers must ensure that long term testing is taking place throughout the year. Such tests should look at what discount values drive the highest increase in customer lifetime value. What discount types increase revenue - will a basket abandonment email offering a discount be more likely to generate a purchase than one welcoming a new customer? Are both needed? What type of discounts work best in each scenario? And at what point should a discount actually be offered?

These tests will provide the data required to ensure that average order value is boosted during the holiday season through buyers who come onto the website to purchase a specific item, but are more likely to stick around and become frequent customers through the use of personalisation and meeting the customer's intricate requirements.

Crossing the finishing line
About 60% of items put into online shopping baskets never get purchased, and with the volume of digital noise throughout the holiday season amplified prospective customers are easily distracted. Excited about your product one moment, but clicking on a competitor's website the next, customers are fickle and baskets may merely be used as a holding bay for potential gifts.

Basket recovery strategies that work are not limited to programmatic media and web retargeting. Instead best practice is to optimise the entire purchase journey to mitigate abandonment while at the same time allowing the retailer to cull valuable information that supports the ability to communicate with these customers moving forward.

To counteract abandonment and boost recovery, it is recommended that three phases of the customer journey are tested now to determine how best to adopt and adapt for your brand and specific customers:

  1. Onsite browsing
    Providing engaging content, including well-designed product pages, as well as reviews, articles, videos and case studies can help to push the customer toward a purchase. Throughout the website shoppers should be alerted to messages informing them of urgency - 'Only 10 available' to give them the drive required to make the conversion.
  2. Checkout
    It is vital to capture email at the beginning of the checkout process to ensure the retail has the key identifier to support future customer targeting.
  3. Post Abandonment
    The most effective way to increase basket recovery post abandonment is through a well-tested email series. Within hours of the basket's abandonment, send out a message that compels the customer to act urgently by reinforcing time and inventory limitations. If the initial message doesn't work then follow up a few days later with another email, while recommending other products which may be of interest to the customer - offering a discount should be a last resort throughout the year, but you may want to bring this to the front of the series during the holidays to ensure your customer knows that they can save with purchase.

"The bottom-line is that the holiday season is the most valuable time of year for both revenue and data collection. While you can't control shopper behaviour, you most certainly can do everything in you power to influence it," concluded Capel.

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