How Discounts Impact Customer Loyalty
In this clip, Allison Hartsoe, CEO of Ambition Data, walks viewers through her Discounting Framework. You'll learn why data maturity and consumer demand are the key variables when considering the discounts you're offering customers. You'll also learn why regular purchases from discounts aren't necessarily a good indication of customer loyalty.
The discounting framework
discounting framework quadrants
Should you use discounting to improve customer loyalty? The answer to that question isn't as simple as it may seem. Conventional thinking suggests that yes, a discount typically results in more purchases. But more purchases aren't necessarily indicative of customer loyalty. In the matrix below pulled from our Discounting During COVID article, brands can see the situations where offering a discount could be appropriate. The discounting framework applies during COVID and post-COVID.
Data maturity and consumer demand
The two axis on the matrix below are data maturity and consumer demand. These are the variables that brands need to consider when determining if they should offer a discount to improve loyalty. As you can see in quadrant 1, a discount can be appropriate for a brand who has low consumer demand and low data maturity. These discounts typically attract people based on better pricing. Quadrant 2 are app driven loyalty programs used for brands who have high consumer demand and low data maturity. These are typically programs that involve bulk pricing, i.e. spend a certain amount and get this free gift or a certain percentage off your order.if a brand has high data maturity but low consumer demand then quadrant 3 would offer appropriate discounts to improve customer loyalty. These are highly targeted offers to specific segments of customers that can drive purchases from your brand. One tactic that was used by the hotel industry (which has high data maturity) during COVID was to offer their customers to buy points or package now that could be redeemed later.High data maturity and high consumer demand are found in quadrant four. This is probably the best use of discounting and include time-bound and hyper-personalized offers. In this quadrant brands can understand exactly the right time and right person to extend a very personalized discount to as a way to improve loyalty.