Every single person reading this appreciates a great deal. I guarantee it. To land on a site with no expectations and get served a “20% off” or similar – it’s hard to ignore. It’s also one of the most potentially damaging strategies in the retailer playbook and one that might be nearing its own expiry date.
Certain brands have become famous for issuing site-wide discounts on events like Black Friday. Even thinking beyond the obvious examples, I can reel off five independent, online-only retailers that will drop a store-wide code into my inbox at least five times a year.
As our favorite brands slash their prices in a race to the bottom, customers have grown to expect large, one-size-fits-all deals on certain purchases. The need to compete alongside behemoths like Amazon and keep up with the Joneses on events like Black Friday has led to what I’d call the conundrum: bigger blanket discounts, delivering more sales, at a lower margin.
The dilemma of whether to stick or twist has become industry press fodder. ‘Is Black Friday a Spectacular Own Goal for Retailers?’. In our books, no, but if we don’t start exploring transformative approaches to our major sales events, those discounts are only going to get higher before the participating retailers go bust.
What is the alternative?
According to a survey from Gartner, the majority of US shoppers (63%) identify as being ‘deal-seekers’ – that is, they routinely look for ways of finding the lowest price possible, rather than prioritising convenience or loyalty to specific brands.
There’s nothing intrinsically wrong with issuing a generous promotion to appease all the deal seekers passing through your site. My view is any extra volume gained from a blanket discount becomes more detrimental than beneficial in three common scenarios:
- When the extra purchases fall below the retailer’s expectations for margin.
- When the frequent use of blanket discounts conditions customers to only purchase with a deal.
- When the promotion only entices ‘one and done’ customers, who make a low-margin order and then instantly forget about the brand they just bought from.
Smarter, case-by-case incentivisation solves all of these issues. All you need is a goal – like more new customers, or higher AOV – to inform whether or not someone receives a discount.
Not every retailer has found a way to start building e-commerce offers in this manner, but there are so many potential avenues to explore. Let’s look at some of the foundations of a great offer from a fashion brand:
- Customers: New customers, loyal, lapsed
- Value: Minimum spend or margin
- Products: Clothing, shoes, accessories
- Stock: Fast-moving/trending products or stressed inventory
Any one of these conditions can be used to inform whether or not someone receives your biggest deal. By structuring your customer incentivisation efforts in such a way, you save having to resort to margin-reducing promotions, helping you return more sustainable outcomes.
Debunking the case for blanket deals
If you’re of the opinion that mass discounting is a necessary evil, you’re certainly not alone. From RevLifter’s own conversations with thousands of retailers over the years, I’d wager you’ve thought about some of the common reasons for sticking to your guns. Let’s see a show of hands for the following…
‘I’m going to lose volume by limiting my promotional aggressiveness’
For one, it’s important to consider the short-term impact to margin and the long-term impact to customer behavior from blanket discounting. It’s also important to realise that you can still incentivise plenty of sales with a “20% off” or similar. It just pays to choose the categories, items and carts that give enough in return.
‘Case-by-case incentivisation? My tech team can’t handle that’
Building a smart, goal-driven incentivisation strategy can take months. It can also take a matter of days, and it depends entirely on which route you head down.
One of our favourite performance marketing developments from the past couple of years has been the pre-installation of technologies onto tags. Through this, affiliate networks like Awin, CJ, and Rakuten now have their own way of helping retailers go live with a select group of innovations within days. Their tag-based implementation services are perfect for linking on-site partners with brands who want to explore the types of segmentation capabilities that can bring an end to mass, one-size-fits-all targeting.
‘All of my discounts go through coupon partners – my hands are tied’
Coupon sites still have value, but we’d implore you to think about all the high-value customers that land on your site. Regaining control of your deal-seeking traffic through PPC should be the first priority. From here, it’s all about how you’re segmenting your audience to determine who gets a discount. There are several guides to help you do this.
Further, when you do work with coupon and deal sites, carefully vet your partners to ensure that they are aggressive in ensuring visible offers are valid, not expired or fraudulent.
What to expect in 2021
Every year brings different conditions that influence the level of discounting around peak sales events. Let’s take 2020, in which COVID saw the conundrum and added fuel to its fire. The need to generate cash and shift stock that built up during the temporary closure of physical stores led to many retailers issuing big, blanket sales to provide breathing room on their books and their warehouses.
This year is set to be different again and especially in Europe, with supply issues, rising shipping costs, and driver shortages leading to predictions of fewer discounts for customers over Black Friday. It’s terrible news for the more ardent deal seekers, but it could be the circuit breaker we’ve all been waiting for.
With many analysts touching on the potential for longer sales events in Q4, logic points to a shift away from rapidly grabbing customers with mega discounts in highly concentrated periods. If that causes at least some brands to consider the value of short-term boosts to performance, we could be onto a very good thing.
