To Discount or not to Discount, that is the question?

Hazel has been with Big Data for Humans for two years and loves how our family of humans has grown. She graduated from Lancaster University with a first class BBA degree in Business Management, where she also got the opportunity to live, study and surf out in Australia. One of Hazel's biggest achievements was completing Jailbreak and managing to get to Amsterdam without spending a penny.

Pop this question into Google and you’ll get 276 million hits, it’s well versed with opinions on the pros and cons. Realistically retailers will always discount, there’s no escape when Global retailers like Amazon spark days when mass discounting is the norm. Yet, what is the answer to when retailers should offer the villainous discount?

A recent article on ‘Discounting Christmas’ by Richard Hyman of Richard Talks Retail gave a short and straight to the point review on the diet of discounting and the affect it will have in 2017. I very much agree with his point that promotions are not being driven by customers but by retailers – often when sales slump the first line of defence is a promotion or discount. What if customers could train retailers to think differently?

Most discounts are driven by retailers attempting to attract new customers away from their competitors, but often we miss the fact discounting sets a precedent. There are stores I will only shop at when they are on Sale, because that’s the value I associated with them the first time I purchased.

As a by-product, retailers often accept the cannibalisation of margins occurring by giving loyal customers a discount – mainly because they can’t decipher who they are. I agree we must reward loyalty, but how about early access to next seasons collection, instead of discounting the cast-offs of last?

A retailer reconsidering their stance on discounting is John Lewis. Just yesterday their customers received an email survey asking whether they thought reducing prices devalued their brand. Finally, a retailer that is thinking of the longer term impact.

Today’s customer is far more price sensitive because they have the global high street in the palm of their hand. Price comparison sites, next day delivery, click and collect and now 1-hour delivery means an alternative is never more than a few clicks and hours away.

So how do you to approach this conundrum:

- Don’t discount (offer alternatives i.e. Waitrose free Coffee)?

- Give the blanket one size fits all discount?

- Understand your customer segments and target only those who need a discount?

Every retailer is unique and approaches discounting differently. As a result of reading this, I hope retailers think twice before offering a discount as the first line of defence and instead use the tool of discounting in a timelier and targeted manner.

How do you approach discounting? Let us know in the comments below.

What if you could look at your customer groups and understand which of your customers would buy regardless of whether you dangle that 10% off in front of them? That’s exactly what Big Data for Humans are helping retailers to understand – how to use price reduction strategically, in addition to making it much more customer focused and below the line.

“Discounting Christmas” by Richard talks Retail is available to read here.