How discounts & deals increase customer loyalty
As a business, there will be times when you decide to offer discounts, deals or coupons to increase revenue and customer loyalty.
However, if not done correctly, you could cause significant damage to your brand, and even become unprofitable.
If you’d like to start offering discounts and deals but don’t know where to start, then read on. Here, we look at the different types of promotions you can offer, and the most effective way to use them.
The Pros and Cons of Offers
As with everything in business, there are both pros and cons when it comes to offering deals and discounts. It’s important to weigh up both of these, before deciding if they’re worth pursuing:
- Increased customer acquisition
- Increased number of conversions
- Increased customer loyalty
- Great marketing opportunity
- Decreased margins and profitability.
- Potential brand damage if done regularly
- Reduction in conversions outside of sale periods
- Increased purchases from non-loyal (price driven) shoppers
Which Offers Are Right for Your Business?
Businesses will often offer deals to increase conversions and encourage customer loyalty. However, depending on the type of business you operate, discounts could have the opposite effect. That’s why it’s so important to consider your brand strategy before you start dishing out the deals.
If you’re a high-end brand or have slimmer margins, then you may want to stick to customer loyalty offers, as opposed to weekly sales. However, if your margins are healthy, then regular discounting may be the solution to achieve your goals.
Therefore, it’s crucial to consider which offers fit in with your overall brand strategy, although there will be an element of experimentation in order to understand what your customers respond best to. Over time, you will realise what works well (and what doesn’t!).
Different Types of Offers
There are so many different types of offers available, it can be difficult deciding where to start. Here are some of the most common ones:
Percentage Based Discount: This is the most popular way to offer discounts. You can either start off small, with 10% or 15% of products, or drive sales of old stock with discounts of 50% or higher.
Free Shipping: 58% of UK shoppers said they would shop more if free shipping was offered, making this a potentially profitable deal to offer. You could offer free shopping with a minimum purchase requirement. Just be aware that you may want to limit this to specific countries so you’re not losing out on money, Also, take into account that there will be some customers who will order extra to get the free delivery, before returning the items!
Free Gift: Offering a free gift with a purchase is a good way to add value to the customer. It’s also a good way to shift excess products that just aren’t moving.
If you’re using Shopify for your online store, then find out how you can effectively use discount codes to drive purchases.
When and How to Use Offers
Much like the range of promotions you could offer, there are so many different ways you can use them to increase revenue. Here are some of the more popular ways to use discounts and deals to your advantage:
1. Prelaunch Offers
If you've yet to launch your business or new product yet, then offering a pre-launch promotion can help to create intrigue and drive traffic.
2. Weekly or Monthly Offers
By offering regular deals, you could help to drive your sales and meet your revenue goals. Popular times to offer these deals are at the end of the month, to drive an increase in sales.
3. Holiday or Seasonal Offers
Whilst Christmas, New Year and Black Friday are the biggest holiday periods for retailers to offer promotions, there are lots of other times of the year you can offer promotions: Easter, Halloween, the school summer holidays – just make sure they tie in with your business before you roll out the deals.
4. Abandon Cart Offers
28% of shoppers abandon their cart if they’re faced with unexpected shipping costs, and 23% will abandon if they have to create an account.
Help to reduce these figures by providing browsers with offers to incentivise them to come back and purchase from you. A percentage based discount with a time stamp could work well here.
5. Exit Intent Offer
For some customers who are on the verge of leaving your website, all it takes is a last-minute deal to convince them to purchase. Create an exit intent offer to pop-up as their mouse hovers over the ‘x’ tab, and watch your number of conversions increase.
6. Email or Newsletter Subscription Offer
As all businesses will know, building an email list is extremely important, as it means you can send customers updates about your business and the products you offer.
With a loyal customer base who are actively interested in what you have to offer, it’s a great place to offer discounts to encourage them to purchase again with you.
7. Social Media Offers
One of the hardest parts of starting a new business is to get word out. Social media is a great way to do this, as it encourages customers to actively endorse you. Provide offers to those that like, share or follow you across social media sites to help your brand gain a higher reach.
8. Exclusive Social Offers
Offering deals on your social media sites can be a great way to build relationships with those that follow you, as well as encouraging others to follow. Just be aware that there will be many people who will unfollow once they’ve received the discount.
9. Influencer Offers
As you’ll have an insight into your customer base, you’ll know which celebrities or bloggers they admire. It can be great exposure for your brand to partner with these influencers and offer discounts, for instance on their social media sites. An endorsement by an influencer could lead to a huge increase in sales.
10. Customer Loyalty Offers
Help to create an even stronger bond with customers by rewarding loyalty with discounts. Make discount codes exclusive to specific groups of customers, to say thank you for purchasing from you.
11. Referral Offers
People are much more likely to buy from you if they’ve been referred by family or friends. Take advantage of this by offering promotions for referrals: you could offer a deal to both the person referring, and the person who has been referred.
12. First Time Shopper Offer
There will be people out there who are considering buying from you, but just need that extra nudge. Providing a first-time offer could be just the thing to entice them, and who knows, they may become a long-term customer.
13. Minimum Purchase Discount
An effective upselling tactic is offering a discount when a certain value is reached in an online shopping cart. This could be free shipping, a free gift, or a percentage off. You may decide to roll this out across all of your products, or just a specific product or collection, depending on what your targets are.
14. Retargeting Offer
Target those who have previously been on your website, by showing deals and discounts as they visit other sites. This could well serve as a reminder to buy something they previously looked at, encouraging them to buy from you.
Whilst offers and discounts aren't right for every single business, by understanding your brand strategy, you can explore the above offers and decide if they’re right for your customers. Promotions are just one potential way to meet your objectives, increase revenue and drive customer loyalty. For more tips for optimising your business, head on over to our blog.
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Andy has been part of the Khaos Control Solutions team since 2006, starting out as a Product Trainer and graduating to leading the training team in his first year. By 2008 Andy was a member of the Senior Management Team as Operations Manager and has gained a wide-ranging knowledge of Khaos Control and the people behind it by time spent managing...