Balance Sales & ROI With The ‘4 Es’: Discount Culture Has Us All In A Race To The Bottom

12 March 2024: The dual forces of inflation and increased cost of living have cast a looming shadow over holiday spending, reshaping the way individuals approach and plan for festive seasons as per Ganga Ganapathi's, VP and Head of International Marketing, article in Marketing Mind. As the prices of goods and services escalate and the overall cost of living edges higher, consumers are faced with the challenge of reconciling traditional holiday celebrations with the economic realities of the day.

While shoppers are tightening their wallets, marketers are starting online sales initiatives sooner, year after year. The discount period has metastasized from days to months. Thanks to back-to-back festivities from Diwali, Black Friday, Christmas, to New Years, the discount season starts earlier and lasts longer. But the straw that breaks the camel’s back is what is called ‘runaway train discounting’.

As per Deloitte, only 57% expect sales growth this year vs. 67% from last year. Moreover, with 71% expecting discounting to increase this year, more than 50% expect a decline in margins.

While the discounting technique can be alluring, runaway train methods often end up affecting the customer’s perception of the brand. Your brand’s ‘Reason to Buy’ shifts from USP to BSP (best sale price). It ends up treating all customers the same, thus alienating loyal customers who see one-time shoppers taking advantage of the discounts with ease. Not to mention how it can turn off prospective high-value customers who are looking for more than just deals.

It is interesting to note that, this shift in behavior has, in fact, led to the emergence of sustainable and value-based shopping. Consumers are more conscious of their purchases and are opting for products that align with their values and eliminate waste.

In a market deluged by click frenzy, this trend of conscious shopping while deal hunting is an opportunity for us. It enables a pivot from ‘discounts for all—all the time’ to ‘value-based conversations for each one.’

To meet deeper consumer expectations, marketers would have to innovate with better data and technology. This can yield win-win outcomes. Customers enjoy personalized experiences that serve their values and save money. Marketers can protect margins, acquire high-value customers, maintain brand loyalty, and make every penny count by targeting the right person with the right message at the right time. However, you need a game plan!

Raising the game with the 4 E’s:

1. Envision Data-Driven First Party (1P) Strategies

Holiday shoppers are not alike. To create deeper, more diverse value, we need data offering a more holistic understanding of the customer. Marketers should approach 1P data with the same seriousness that architects approach building foundations—the crux that holds up the entire edifice. Rather than using a marketing approach that is universally applicable, a partner could complement that information with more third-party data for distinct clusters. Over time, it also assists in identifying worthwhile chances.

2. Enhance 1:1 Personalization Across Digital Media

An Epsilon retailers study earlier this August, revealed that 80% of customers are more likely to make a purchase when brands offer personalized experiences. The goal is personalized, omni-channel recommendations based on customers’ preferences and digital profiles, at scale, and across the entire customer journey.

For instance, you may target a high-value customer with luxury products at 10% off rather than offering them a promotion like “25% off on shoes” (even though they weren’t looking for it) because your 1P data indicates that they are in the market for it. As they decide to buy, you also recommend a matching luxury item. This creates a meaningful experience. It also enhances sales without losing margins.

3. Execute for Measurable ‘Total ROI’

How do you define holiday sales ROI? Are discount-led high sales numbers enough? What about lost margins and disengaged, loyal customers? That is no small collateral damage. ‘Total ROI’ is when you look past sales numbers and include other key metrics. Did I target relevant, high-value customers? Did I maintain loyal customers? Do I know which channels gave me the most returns? Or which of my activities drove conversions? Data-driven ‘total ROI’ ensures you do not sacrifice long-term values for short-term holiday highs.

4. Extend the Conversation Into the long-term

Myth: Most customers acquired during the holiday shopping season are bargain hunters.
Reality: While some may be deal-focused, many have long-term potential.

Marketers are responsible for implementing nurture programs that engage consumers emotionally and convert them into loyal spending customers. Epsilon research shows that emotionally loyal customers have a 4x higher lifetime value. Use your different touchpoints—from email to catalogs—to encourage that second order, where profitability lies. For some customers, this might happen quickly. For others, with cost-of-living pressures, it may take longer. However, if you personalize and stay relevant, you build equity until they are ready to buy.

Holiday marketing isn’t just about deals and discounts, it’s about human beings searching for meaningful experiences in the year’s happiest season. When we shift from runaway train discounting to value-based marketing, we put people’s true values at the heart of what we do and make each person feel special. In fact, that level of insight and empathy is still possible today thanks to data and technology, but don’t do it alone. It helps to have a partner who can segment your audience, create compelling propositions, and deliver hyper-personalization at scale, promoting the ideal value exchange this holiday season and beyond.