Retail is a fiercely competitive business, with smaller stores fighting against large chains to gain and retain their customers. One of the reasons why competition is so fierce is because consumers know how to find and negotiate the best deals. Whether it is offers instore or discounts delivered via an app, customers now have the knowledge and power needed to ensure that they get the best value for money.
Most merchants now accept that it is necessary to provide coupons, deals and discounts if they are to boost their conversion rate, increase revenue and drive customer loyalty. Nevertheless, failing to utilise them in the right way could have quite the opposite effect.
In this blog, we will explore some of the benefits and consequences of offering deals for your ecommerce store, and how you can use them to successfully improve conversions and increase the loyalty of your customers.
The Importance of Customer Loyalty
In retail, loyalty is defined as when a customer chooses to return to your business for their purchases time and time again, forsaking other merchants. It is the quality in customers that retailers covet the most. This is because, returning customers, particularly those who belong to loyalty programs:
- Spend more, with some reports suggesting they spend as much as 67% more than first-time buyers
- Are 70% more likely to spread the word about your business
- Account for around 20% of your customers, but drive around 80% of your revenue
- Are easier to upsell to
In even better news, it is also substantially cheaper to retain existing customers than it is to acquire news ones. Therefore, while business growth is important, it is equally as crucial to keep the customers you already have loyal to your brand.
To do this you need to understand what encourages consumers to stay loyal to a brand. Contrary to popular belief, this is rarely because they offer the cheapest price. Instead, customers are loyal to businesses who deliver a consistent, positive and personalised service that makes the customer feel valued. To help meet this goal, many brands implement customer loyalty programs which incentivise and reward repeat shoppers.
Whether you are targeting new customers or working hard to retain existing ones, offering discounts and deals via your ecommerce store can help.
Benefits and Consequences of Offering a Great Deal
Just before you rush off and start brainstorming ideas for deals and discounts with your team, there are some benefits and potential consequences that you should be aware of.
There are some great things about store offers, including:
- Easy implementation via your POS
- Easy to track using your preferred POS’s software
- Improved existing customer loyalty
- Increased customer acquisition
- Better conversion rate
- Fast movement of stock
- Greater likelihood of meeting sales targets
- Increased revenue
Nevertheless, consequences of rushing in an implementing offers without a clear and strategic plan in place can include:
- Decreased margins and profitability
- Fewer conversions outside of sale periods if customers are waiting for regular and predictable offers
- Increased likelihood of acquiring price-driven shoppers, who are less likely to remain loyal to your brand
- Reduced average order size
- Possibility of damaging your brand reputation
Fitting Deals and Discounts into Your Brand Strategy
Finding the right deals and discounts for your brand strategy is crucial. Implementing the wrong types of offers could drive your target customers away and replace them with price-driven opportunists who are never going to remain loyal to your brand.
You also need to consider your position in the market. If you consider yourself at the luxury end of your niche, you may prefer to stick with loyalty-based offers. However, if your business is firmly in favour of stacking them high and selling them fast, then deep discounting and multi-buy offers may be more appropriate.
Ultimately, delivering discounts and deals is very much a case of trial and error to find out exactly what is most successful for your brand.
Types of Deals and Discounts You Can Offer
Promotions that you can offer don’t only need to be in the form of a specific price discount, there are many other types of discounts that you use to appeal to consumers, including:
A Percentage-Based Discount
These are simple to implement and are very popular with customers. Discounts can vary depending on the type of stock you wish to shift, for example, by offering a large discount in order to liquidate end-of-line products.
Dollar Value Discount
Similar to a percentage-based discount, this deal offers consumers a set cost reduction, for example, $5 off a $20 or more purchase. These seem more valuable at higher amounts. For products less than $100 we recommend you use a percentage discount instead.
For many customers, one huge barrier to purchase is stumping up extra for shipping. By offering free shipping you can dramatically reduce the number of abandoned carts you see.
It can also encourage consumers to add extra items to their order, as they seek to reap the full benefit of the offer. Use free shipping discounts in conjunction with minimum purchase requirements to increase your average order value even further.
Free shipping offers can be used sporadically, or applied to specific countries and groups of customers, offering you greater control over your promotion and helping you to avoid making a serious dent in your sales margins.
Free Gift with Purchase
If you are going to offer a free gift with purchase, make sure it is a good one that seems of value to your customer. It is also a great way to get rid of old stock that isn’t selling.
How to Use Deals and Discounts to Increase Conversions, Revenue and Customer Loyalty
There are countless ways in which you can use your promotions strategy to boost your sales figures and strengthen your customer’s loyalty to your brand, and it may take you some time to discover which are most successful for your individual business. To help you get started, here are some of the most popular.
Weekly or Monthly Discounts
By far the most common way of using promotions effectively, weekly or monthly discounts can be utilised during predictable quiet periods to boost revenue. Don’t forget to add an expiration date to target the sales into your preferred week, month or quarter!
‘Tis the Season to Sell
Unless you have been living under a rock you will know all about the importance of Black Friday and Cyber Monday – two of the biggest dates in the retail calendar. However, there are plenty of other important occasions throughout the year that you can use to share relevant offers with your customers.
Newsletter Subscription Offer
Most merchants know that an email address is the key to building a long and hopefully harmonious relationship with your customers. Once you have an email address, you can use it to make them aware of new products and other brand developments, as well as tempt them with unique and personalised discounts. One of the easiest ways to get your hands on this important piece of information is to offer a trade – such as a percentage discount or set number of loyalty points when the customer signs up to your newsletter… by giving you their email address.
New customers can be wary about trying a new brand for the first time. However, they are considerably more likely to complete the path to purchase if they have been referred by a friend or family member. By choosing to create promotions based around referrals, you have the option of offering a deal to the referrer, the new customer or even both. Common promotions include percentage discounting, dollar savings and free shipping.
Minimum Purchase Promotion
When it comes to upselling, little works better than a promotion based on customers bagging a minimum order value. This will push up your average order size and your profit margin, provided it is planned correctly. One of the most common and successful promotions is free shipping, but you could offer a discount instead. You can apply the discount across your whole online store or use it to focus customers on specific products that you are hoping to shift. Make sure you check your figures carefully to ensure that the offer only applies if your costs are covered!
Customer Loyalty Programs and Rewards
As we have already learnt, existing customers are extremely valuable to your business. Rewarding loyalty can strengthen the bond between you even further. Great POS systems like Hike make implementing a loyalty program extremely straightforward, and there are countless ways in which you can thank your returning customers for their support. Some of the most popular targeted loyalty promotions include:
- Collecting points which can be exchanged for products
- Percentage or dollar discounts on products
- Minimum purchase promotions
- Free shipping on all purchases for loyalty members
- Referral-based promotions
Incentivise Online Orders
If you want to drive up your online sales, then you need to incentivise these orders with a killer promotion such as by offering free shipping. If you want to encourage your customers to visit your bricks and mortar store, then consider offering a discount when they choose to buy online but collect from store. Their presence in store will give you the opportunity to deliver an epic real-world shopping experience too.
Promotions for Purchasing in Person
Want to increase foot traffic into your physical store? Provide deals and discounts that require your customer’s actual presence – such as coupons or QR codes that need to be scanned. If the offer is tantalizing enough, they will make the journey.
Whether you are just starting out or if you are about to launch a new product or line, it presents an ideal marketing opportunity. Pre-launch incentives help to ramp up the interest in your latest venture and make customers feel privileged to be in on the action.
Banish Cart Abandonments
Abandoned carts are the bane of any business, with around 70% of shoppers changing their mind at the last minute. However, abandoned cart email offers are an important tool in your arsenal and can tempt even the most hardened shopper back. Choose your incentive wisely, whether it is free shipping or a discount on their first purchase.
Reward Social Behaviour
Social media presents a huge marketing opportunity, provides consumers with a way to stay in touch with your brand and is a perfect platform for reviews. Recognising the power of social media, an increasing number of retailers are choosing to reward their customer’s social behaviour (such as liking, following or sharing) with targeted promotions and discounts.
Hold Promotional Events
Today it is no longer necessary to have a physical location for an event. Whether you host one virtually, or choose to get your customers into your store, a promotional even is a great way to engage with your customers and ramp up their loyalty to you. Use the time wisely, by showcasing new products or offering customers a substantial saving if they choose to purchase at the event.
New Customer Deals
If you are trying to grab those elusive first-time shoppers and converting them into loyal customers, you may want to consider a great promotion that offers new customers an amazing deal on your product/service.
This type of promotion is only shown to customers who have visited your site before and are designed to serve as a reminder of the products that they have previously looked at or added to a then-abandoned cart. Google Adwords is one of the easiest and most popular ways of establishing promotions that target almost-shoppers and encourage them to make that first, all-important purchase.
Collaborate with Influencers
The growing importance of social media has also led to the creation of ‘influencers’. These are individuals who have strong online social followings and who can increase exposure to your brand. By choosing to provide an offer that is exclusive to the influencer’s network, you have a strong chance of converting some of their fans to fans, and customer, of your very own! Give influencers a unique promotional code for shoppers to quote when ordering, and you can also witness how effective this marketing approach is working.
Last Chance Grab
Pop-ups are a fantastic way of performing a last chance grab – a final attempt to hook a customer before they exit your site. They are easy to implement, and you can either offer a promotion or discount, or ask the consumer for their email address so that you can send them some targeted deals at a later date.
Marketing strategies vary from brand to brand, and most will find that their promotion plans evolve along with the needs and desires of shoppers and the development of their business. Nevertheless, discounts and deals remain a very important and valuable tool for retailers and so when choosing a POS system to support your business, ensure you choose one, like Hike, that can support all of the marketing incentives you will rely on increase revenue and ramp up the loyalty of your consumers.