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How to Break Free From Discount Marketing: 4 Alternatives for Incremental Returns

Written by
Chris Chan

Discount Marketing is one of the most widely used promotional marketing techniques in almost every industry.

But are discounts truly effective in today’s saturated marketplace or do they just cut into profitability?

Consumers are more cost-sensitive than ever; 60% of online shoppers reported discounts as being more important since COVID-19.

While tools like Honey and RetailMeNot profess to positively affect consumer spending behaviors, they can make promotional campaigns less successful in the long term.

In response to the demand for discounts, creative brands have come up with a variety of powerful alternative strategies that satisfy customers while increasing long-term profitability.

How Do Discounts Hurt Profitability?

As a whole, discounts are harmful to brand profitability, but they do more than just lower the bottom line. Ineffective discount marketing strategies can attract the wrong type of customers while temporarily boosting revenue, leading brands to a false sense of progress.

Discount strategies can lead to a race to the bottom, lowered trust in quality, and lower customer expectations about a brand.

Most notably, discounts can condition consumers to expect lower prices and lead to irreversible undervaluing of a brand’s products.

4 Alternatives to Discount Marketing

To combat the pitfalls of discounts, your brand can execute a number of promotional alternatives that contribute to increased profitability. 

Here are 4 of the best marketing and promotional alternatives to discounts.

1. Create Strong Lifecycle Programs 

Acquiring a new customer can be 5-25 times more expensive than re-engaging existing customers.

While this statistic varies greatly based on industry and paid media impact, there’s no arguing that acquisition costs far exceed retention costs.

Strong loyalty programs are a pivotal part of creating purchase incentives without decreasing profitability. Several powerful brands use these strategies to keep their most faithful customers coming back.

Sephora and Starbucks are both outstanding examples of lifecycle programs done right. 

The Sephora Beauty Insiders program has more than 25 million members that comprise nearly 80% of their total annual sales. The loyalty program features tiered rewards, a point system, and limited edition products.

Sephora does occasionally offer strategic discounts to members, but discounts are not the primary marketing strategy.

Starbucks also does a fantastic job with its Starbucks Rewards program. The coffee chain offers members order-ahead access, featured seasonal drinks, favorite store locations, and Starbucks points (stars) which can be redeemed for menu items.

Members are offered free birthday items and incentivized to move up tiered program ranks to gain access to new rewards. As of Q4 2020, the Starbucks Reward program had 19.3 million members with nearly 50% of their revenue coming from loyalty program members.

Amp up your loyalty programs and other lifecycle strategies for diversified media and stronger lifetime value customers.

2. Establish Long-Term Affiliate Partners With Loyal Audiences

While this tactic can include discounts, affiliate marketing is based on building relationships rather than relying on price cuts.

In fact, affiliate marketing partnerships are especially useful if you’re already using discounts in your marketing. By leveraging affiliate marketing and custom coupon codes, you can incentivize partners to publish media that promotes your products.

Sponsored partners, media companies, and influencers can all help to spread the word about your brand. 

The caveat with affiliate marketing programs is that you want to use them to target your highest LTV audience. By putting affiliate marketing together with your current discount strategies you can boost the quality of the customers you acquire, improving overall profitability.

3. Pair Measurement and Attribution With Channel Strategy

Measurement and attribution is one of the most essential elements of promotional campaign strategy. Running campaigns without substantiated attribution data is the marketing equivalent of shooting in the dark.

If you’re running measurement and analytics based on first-touch or last-click attribution, you’re most likely getting deceiving data. It’s critical to push toward more advanced measurement techniques that will provide better insights.

One of the most important techniques in measurement and attribution for promotional marketing is incrementality testing.

Incrementality testing can help you spot gaps in your marketing efforts and help you discover if your discount campaigns are really driving revenue.

Neglecting to test for incremental changes in marketing campaigns can lead to wasted ad spend and unproductive promotions. 

Calculating incremental return on ad spend (iROAS) over traditional ROAS can help your brand clarify channel strategy and move forward with campaigns confidently.

Pairing insights from incrementality testing with advanced attribution solutions like Media Mix Modeling (MMM) and Multi-Touch Attribution (MTA) can reveal ad spend issues, customer journey gaps, and trending opportunities.

While discounts can be a great way to bundle inventory, acquire new customers and provide engagement, understanding how to properly measure growth gives your brand a unique advantage over competitors, which can propel profitability.

4. Leverage Legitimate Scarcity

Another great method to draw customers without offering discounts is by promoting legitimately scarce items.

This can include offers such as limited-time bundle deals, exclusive time-based extras, freebies, and special releases.

Scarcity campaigns and limited edition products paired with promotion efforts can generate the same buzz for your brand that discounts do, while preserving profit margins.

Extras associated with purchase amount or frequency can enhance the customer experience and lead to an increased number of loyal customers.

Whether used separately or all together, these strategies retain all of the benefits of discounts without diminishing brand value or cutting into profitability.

Do you want to use stronger alternatives to discounts in your brand? Talk to us at WITHIN. We help some of the world’s leading brands build compelling performance branding campaigns without relying on discount strategies.

Featured image by leungchopan on Envato.

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Written by
Chris Chan

Chris Chan is a content writer at WITHIN.

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