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Heavy discounting deters new customers

Customers whose first purchase is discounted by more than 30% are found to be less likely to buy from the same brand again, according to new research.

As discounts rise over 30% retailers are more likely to attract one-time shoppers that “cherry pick” single bargains, customer engagement specialist Optimove has found.

Optimove said while such one-off purchases generate revenue, it only results in short-term profit since customers are unlikely to pay for another item unless it is similarly discounted.

On the other hand, smaller discounts of between 5% and 30% were found as more likely to “charm” customers into coming back for a second purchase.

Up to the level of the 20% discount mark, the likelihood of this customer making a second purchase rises.

EMEA managing director of Optimove Alon Tvina said: “Over the holiday period, retailers are waging all-out war for new shoppers, but acquiring one-time shoppers is extremely costly, especially when retailers use price slashes as a major acquisition strategy.

“The victory of acquiring a new customer may well be hollow: customers making the most of large discounts on offer over the holidays can end up hurting profit margins quite substantially, if they don’t become more regular shoppers.

“Using discounts smartly to attract customers and keep them, will give marketers an opportunity over the coming months to convert one-time buyers into loyal, returning customers. But to do this they will have to look at the data, testing the impact of marketing strategies on customer engagement rather than short-term sales, and adjust offers accordingly.”

Optimove analysed more than one million transactions by online shoppers over a two-year period.

Readers' comments (2)

  • Attracting customers with any discounts doesn’t make them loyal. It just says you overprice to start with.

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  • Discounting is for the weak minded in the trade.

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