Thinking outside the box when it comes to Christmas discounting

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By Ian Webster, Chief Customer Officer, Big Data For Humans.

Christmas is now just over 4 weeks away and we all know what that means for retailers.

Swarms of consumers trying to grab the best deal and the pressure to out do your competitors on discount days such as upcoming Black Friday and Cyber Monday will all of a sudden be a reality. But are retailers just jumping on this US tradition each year with little return?

Clearly many of the major discount days make sense to retailers in the US as they are often viewed as a great way to liquidate excess stock after Thanksgiving and capitalise on eager-to-shop, happy consumers over the seasonal weekend. However, this does not mean that these same major discount days should be adopted by UK retailers, who instead use them as a hook for outbound marketing, in the same way that days such as Valentines Day and Mothers/Fathers Day have been constructed and exploited.

For retailers trying to create additional demand in every category at once, major discount days are a blunt tool that can risk seriously damaging a retailer's reputation if it all goes wrong. Realistically, it's much better for retailers to stand out from the crowd the other 360 days of the year by using service propositions, recommendations, recognition and selective, targeted and modest discounting. To do this, retailers need to have an understanding of the different needs of their customers and customise the proposition accordingly. The trick to really doing something different in retailing is actually about customer marketing, not acquisition marketing.

A retailer knows far more about its own customers than anyone else could ever hope to discover. From the products they buy to the channels they use and the frequency of purchase, this is fantastic insight that gives a retailer an advantage over any other organisation when it comes to creating customer engagement. So why not use it? Mass discounting on days of the year selected by Amazon is the opposite to this.

The key to unlocking the data is to set priorities first and work backwards to answer questions with data, not to stare at the data you have and try and find patterns. Is the business objective to retain at risk customers? Re-engage those recently lost? Up- or cross-sell existing customers? Or simply optimise marketing spend? Defining the core objective as the starting point can transform the way in which this customer data can be harnessed by the marketing team. Within a month, a retailer can understand its customer base, identify the opportunities to make more money from each customer, and create a clear map for revenue generation.

And it is important to remember that whilst discounting days may work for some, they won't work for all; and retailers should instead be looking at the different customer segments within their target base and understand who the best people are to send discounts to, aiming to develop those customers into new price brackets and categories.

Better yet, retailers should be aiming to drive extra orders from their best customers through service propositions, relevant product recommendations and recognition. For example, offering a Formalwear-focused customer who used to buy a new suit every year, a free tailoring service, and communicating this in multiple channels, is far more likely to re-engage that individual than a generic discount offer – and it boosts, rather than reduces revenue – that's real loyalty.

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