BrainTrust Query: In a Deep Discount World, Is 10 Percent Enough?
Through a special arrangement, presented here for discussion is a summary of a current article from the Hanifin Loyalty blog.
The daily deluge of "deal of the day" offers with Groupon, Living Social and others assembling collective buying discounts continues to flood our e-mail inbox. I have noticed the range of offer sponsors to be widening, now including chiropractors and other medical professionals as well as the local newspaper. National restaurant chain Quiznos has created a campaign with Groupon intended to blend the traditional punch card offer with the discounts expected from collective purchase.
The Quiznos Groupon offer — eight regular subs for $26 — is positioned as a way to create repeat business, but let’s see how that goes. If I were privy to the data, I would be interested to understand how many single-use cherry pickers are converted to multiple-use cherry pickers.
I’d also like to know if the element of captured loyalty (I’ve paid for eight subs and had better use them up) results in continued use after expiration of the Groupon or if brand boredom takes hold and these same customers don’t come back for months. It’s all entirely possible.
Amidst all the Groupon-like activity, I received an email from Best Buy touting (gasp!) a 10 percent discount on a variety of products leading up to the Memorial Day weekend.
I have to wonder openly if a 10 percent discount, with restrictions by product category that require reading of the "smaller print", are still changing consumer behavior these days. There are a few possibilities:
- Best Buy is smarter than the rest of us: If your numbers tell you that 10 percent works, why play the deep discounting game? Doing so would be akin to creating a Facebook Fan page with no idea why you are doing so.
- Best Buy is weathering the deep discount storm: Hoping that collective buying is a fad that will go away soon, the company could be persevering with proven tactics hoping to preserve margins as long as possible.
- Best Buy is asleep: Sure, they could be missing the boat, watching as the market moves away from them, but this is highly doubtful. The folks in Minneapolis are very good at their trade and the collective buying storm has mostly been directed at local merchants rather than national chains, Gap a notable exception.
For many retailers, 20 percent has been the magical number at which consumers give attention and reach for their wallets. Ten percent is just plain uninteresting, in my book, and the fact that I have to spend time to understand which products qualify is mildly annoying.
The attraction of coupons to me is clarity — WYSIWYG — but offering coupons is a mercenary game in which the bigger numbers get the most play. It’s also a highly destructive game — to profit margins that is.
Though collective buying is "something we sell" and "something that is working" these days, I’d rather advocate "something I believe in" which is integrated customer strategy that yields measurable results over the long term.
Discussion Questions: Is the effectiveness of promotions at traditional retail being diluted by “daily deal” coupon offers? How may couponing and other promotional efforts have to be restructured?