Does Discounting Hurt Your Image?
By: Jodi Cross
With all the Groupon’s, Living Social’s, Coupon Clippers and web sites offering discounts, how do you know what is right for your business? More importantly, does discounting build loyal customers or hurt your image? The answer isn’t as simple as it may seem.
Discounting drives immediate sales transactions and more visits by loyal customers at a lower rate but it can also hurt your profit and reduce your margins. When dealing with mass marketing sites like Groupon and other sites, they take their cut on top of your offer, which doesn’t leave much of a profit.
There is an upside to discounting, immediate traffic, but you want to avoid the discount driven bargain hunters who will never become your loyal customers. Many customers wait for the discount to engage with your product or service. In essence you are training them to wait for a sale. Think about the retailer Macy’s, they constantly have sales and send out coupon. It has gotten to the point where I won’t even shop at Macy’s without a coupon.
So, how can you convert the discount driven customer to a loyal customer? By getting to know them and winning their business through service and personal attention. Every business should understand your customer base and buying habits. Find out how often the same customers use your product or services? Determine if they are new customers, one-time discount users, frequent or heavy repeat customers.
Use social media and review sites to log comments and see who influencers are. For example on Foursquare there are communities with mayors who are influencers. As a business owner you should know who the influencers are and be working your business cycle to convert “First Time” visitors into regular users. Here are some rules of the road that can help avoid the pitfalls of discounting and help you build loyal customers.
If you are going to run a mass marketing promotion make it a short-term promotion, no longer than six to eight weeks then give it a rest for a few weeks. During that time analyze what your business trends and your bottom line profit. Did you see a short term lift or did it hurt your bottom line? Did you see the type of clientele from the promotion that would fit your demographic profile and did you convert any of them to loyal customers?
Think like a “Mom & Pop” business. The one’s that remember how you like your coffee or how your shirts need to be pressed. Build your in-house database of customers, gather birthdays, anniversaries, note their “likes and dislikes.” Create a one-on-one relationship with your customer.
Here are some tips to avoid discounting your brand image if you are planning on doing some special offers this summer.
- Make sure all promotions have a limited time period to run with an expiration date-6-8 weeks. This creates urgency. Then analyze the results.
- Disguise your discount with a theme or wrap it in a special event like; Mother’s Day, Fourth of July, or Labor Day specials.
- Use discounts that support your brand and build your internal database.
- Use bundling as a way of disguising the discount. Offer a “Tour of Italy” and bundle some spa services that include grape treatments and a glass of wine to entice trial.
- Look into partnerships as a way to get a discount out to a select group of customers. Friends and Family discounts are very popular during off peak times.
Monitor your customer’s patterns; keep on top of review sites and social media to engage them. If you make your customers happy by providing good service they will tell others and you won’t have to discount on an ongoing basis.
Jodi Cross is a marketing consultant and freelance writer, she may be reached at firstname.lastname@example.org.