Discounting is a mainstay for retailers to drive sales, but relying on this is costly. Eroding margins, price-sensitive consumers holding back spend in anticipation of discounts and retention concerns mean a new antidote is needed to the overuse of discounting. While its initial sales impact is immediate, a growing dependency on it results in it becoming less effective. This leads retailers to introduce deeper and more frequent price cutting to attract customers, and this vicious cycle lowers margins, reduces profitability and erodes business.

Paul Gray, Marketing Director at Chums, summed up the danger of over-relying on price cuts in our recent report, What retailers really think about Black Friday, stating, “Discounts are important for customers and us, but you have to use them carefully. It's like the retail version of antibiotics: if we overuse it, its effectiveness is completely destroyed. But if you use them sparingly and diligently, they are a very effective tool.”

With today’s economic challenges further impacting margins, retailers are seeking fresh approaches to rebalancing this situation – and the answer is Partner Marketing.

Kicking the discounting addiction

Yes, discounting works, but it's not the answer on its own. At a time when brands are struggling to communicate directly with customers, creating a platform for engagement is critical. 

Partner Marketing creates a value proposition out of an experience. It gives access to a network of supporting reward businesses so retailers can swap discounting and instead offer experiences that have a value to consumers and reflect their objective – from cups of coffee or mindfulness apps to money off eating out and free dry cleaning. In doing so, suddenly, brands are freed from having a price-promotion mentality and can build emotional connections instead with their customers.

A good example of this is the work Mike Brinn from TLC Worldwide did in conjunction with Aldi. To help the discount supermarket increase in-store basket spend during summer and promote its partnership with TeamGB and ParalympicsGB, it offered a free child’s sports lesson for every £30 spent in-store. In doing so, parents could benefit from keeping their children active over the long summer holiday without paying for this at a time of increased pressure on household spending. For Aldi, this meant reinforcing its commitment to sport, gaining the goodwill of its customers and helping to drive up basket values without the need to discount.

While customers have been trained to expect discounts through retailers' actions, it doesn’t naturally mean that lower costs are what they desire. By using data to identify rewards that customers assign true value to, Partner Marketing can tap into opportunities that build emotional attachment and create a better customer experience.

Doing so transforms the situation by shifting the emphasis away from price. Instead, it supports and amplifies a brand's storytelling while expanding this into ‘story-doing’. Now, the rewards a brand offers can reflect its ethos and values. So, if their story focuses on sustainability, the rewards should mirror this, such as planting a tree for each sale. Or if they’re all about wellness, they should be tailored to helping people be healthier.

Significantly, with technology, these rewards can be developed into a programme available to all your customers, not just a lucky few. While retailers have focused on their VIP buyers, Partner Marketing extends this to the next level of customers, who are often those at more risk of switching and looking for discounts. By cultivating this group, they can offer retailers the best opportunity for revenue growth.

Re-establishing the importance of brand

Interestingly, an addiction to discounting isn’t solely the preserve of budget or middle-tier brands. Luxury retailers are equally obsessed. And for such brands, a focus on promotions runs counter-intuitive to their positioning. Discounting doesn’t build brand equity or emotional connection. Instead, it leads to an imbalance between their messaging and how they operate, which confuses the public, devalues their brand, removes exclusivity, and makes them appear the same as any other retailer. 

But retailers can change the dynamics by adopting engaging approaches that foster long-term relationships. Emotional connections build stronger brands, and engaged customers stay with you longer, spend more and are more profitable.

As we approach Black Friday, the Partner Marketing concept is very pertinent. With businesses looking to protect brand equity rather than follow the herd and offer discounts, it allows retailers to adopt a different and more valuable approach to incentivise purchases without impacting margin.

Of course, price promotions will always play a role for brands because they work. But overinvesting in these tactics damages a business. Retailers must look at new options in today's economic climate, and Partner Marketing offers a healthier alternative. In embracing this, they can entice and reward customers by creating experiences to which they attach a high value without defining themselves as discounters. Importantly, they can escape the price promotion cycle and better manage their margins while providing a way to differentiate themselves in the eyes of consumers.

If you’re interested in seeing how Partner Marketing can protect your bottom line and reduce your reliance on price promotions, get in touch with Roger.Stevens@epsilon.com. He’ll be more than happy to chat through your needs and explain how Epsilon and TLC Worldwide can support you in embracing this strategy.