Discounts vs. Customer Experience: Which is Better for Loyalty?

Stampfeet
5 min readDec 7, 2017

Consumers love a bargain. Online stores have thrived thanks to their ability to offer lower prices than their brick-and-mortar counterparts. Discounts make perfect sense. Who doesn’t want to save money, right?

Once an American concept that British consumers didn’t indulge in, at least openly, discount codes have become all the rage. According to marketing agency, Browser Media, in 2014–15, four in five adults in the UK used a discount or voucher code (both online & offline).

The website, VoucherCodes.co.uk boasts over eight million registered users and partnerships with over 4,500 of the UK’s leading retail and restaurant brands. Consumers are no longer embarrassed to use discount codes and coupons, and — as Black Friday has shown — they’re not shy in getting to the front of the queue for a cheap deal.

The opportunity of making a saving is a great way for retailers to get customers through the door, there’s no doubt about that. But how good are discounts for keeping people coming back? How big of a role does price play in retaining customers?

Price matters

For stores, both online and offline, discounts present the simplest way to compete. And they’re proven to work: 71 percent of respondents to a Fastmap consumer survey said that they like to buy brands that are on promotion, while 39 percent like to buy at the lowest price point, whatever the brand.

Unfortunately, pricing can also make consumers a fickle bunch. And rightly so. It’s hard not to be tempted by an attractive discount. According to that same Fastmap survey, pure price discounting — knocking money off to make a product more attractive — works to tempt 48 percent of people into switching brands. 45 percent can also be convinced into purchasing a different brand with a printed coupon.

‘Buy one, get one free’ is another way to get people to check out a new brand, with 85 percent of consumers saying they’d be ‘quite likely’ or ‘very likely’ to make the switch with a two-for-the-price-of-one deal.

Based on those stats, it doesn’t look good for discounts in the customer loyalty stakes.

However, a drop in the price of a product that a customer has bought previously, individually or in bulk, can result in them filling their trolleys up with more. Similarly, if the product is expected to rise in price shortly. Buying more from the same brand can seem like an act of loyalty, but when this is achieved through discounts, brands are at the mercy of price wars. Customers go elsewhere when something shinier or cheaper comes along.

Experience matters more

When you dig down and look the statistics behind customer loyalty, everything points to experience over price. There’s a simple reason for this: Human emotion.

We like how brands make us feel, how they connect to us personally and how their values match up with our own.

However rational we think we are, there’s always an element of emotion in our choices.

When Facebook asked people to use words to describe the brands they loved the most, the largest group of words were under experience:

Emotion connects us to brands; price doesn’t.

Price is important in the customer journey, though — particularly in the stages of awareness, research and purchase.

But it’s not until we’re hands-on with our purchase that we really connect. Our experience once we’ve purchased something determines whether revisit a brand or business.

Experience at this point is all that matters.

According to a study by Accenture, 53 percent of Brits switch providers because of poor customer service. It also found that service outweighs price by 20 percent.

Among the reasons given by customers as to what mattered to them, the ability to get assistance from a company without being forwarded to multiple representatives, faster resolution of problems, quality and speed of response, and the manner of customer service agents all featured highly.

Notice a trend there? They’re all things related to the customer experience.

In the moment experience

Why do people continue to shop at Waterstones or Barnes and Noble in the US when Amazon is cheaper and can deliver your products on the same day that you order them? Because people who buy books want the experience over the convenience of a book being posted through their door. There are leather chairs and sofas and beanbags to sit on. You can buy a coffee and browse the books at your leisure. It’s much more personal and enjoyable for book lovers than an online checkout. The experience outweighs the higher price of the products.

It is somewhat similar when buying technology, even when there is an ever-widening price difference.

Despite often being cheaper and with better reviews, not one brand of Android phone outperforms the Apple iPhone. And it’s all because of the “Apple experience”.

It all starts with the way employees are trained and empowered to believe they are changing the world. Each employee is an expert in walking through customers through five steps that spell out the word APPLE. The author and skills coach, Carmine Gallo, talks about it in his book The Apple Experience. He also briefly covers the steps in a Forbes article:

A: Approach customers with a personalized, warm welcome

P: Probe politely to understand the customer’s needs

P: Present a solution for the customer to take home today

L: Listen for and resolve issues or concerns

E: End with a fond farewell and an invitation to return

Simple, but hugely effective.

The enthusiasm for the brand and the personal approach offered to each, and every customer that walks into an Apple store are things that stay with people. Nobody is a consumer; they are a person looking to buy something from someone that looks after their needs.

Keep price in mind, but focus on experience

How you treat customers when you have them makes all the difference when it comes to keeping them. Engaged customers are five times more likely to buy from the same brand in the future. They also buy 90 percent more often, spending 60 percent more per transaction.

Discounts are an effective way to attract new customers or reward loyalty with an exclusive offer that other customers can’t get. Experience, however, keeps customers coming back, even when they could get a similar and cheaper product elsewhere. Businesses, such as Waterstones and Apple, don’t generate positive and growing returns for stakeholders and shareholders by being the cheapest.

It will be increasingly difficult growing and sustain companies when the only pricing strategy is a race to the bottom, compromising quality and service in the process. Discounts and deals will always play a role, especially for retailers; but combining occasional and seasonal offers with an experience-centric approach is far more effective. It’s what the customers you want to attract, want to see from brands that stand out from the competition.

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Stampfeet

Customer loyalty and engagement solutions that increase retention rates and sales. www.stampfeet.com