Are We Grouponing Ourselves to Failure?
Can a Business Build Customer Loyalty Through Discounting?
Austin, Texas: For the past few months, I have been getting my email in-box stuffed with coupon offers from Groupon, Living Social, Moolala and others.
I understand that sometimes it is important to bring a customer into your store or restaurant in order to experience it for themselves. But substantial discounts, open to all, is very rarely a winning proposal.
I am in the loyalty and incentive business, so I can appreciate when businesses are trying to improve their market share by increasing customers.
But why money off?
Is it because your competitors are doing it? Fine, let them lose money on each transaction. Good for you.
Once you start the vicious cycle of discounting is tough to wean customers from it.
If I can buy a sub sandwich and chips for $3 one day — why is it worth $7.50 the next day without a coupon?
Loyalty cannot be built over any length of time by being the pricing leader.
Fair value–very important.
Lowest price–can’t happen along with great customer service.
Instead of competing on price, why not offer different levels of service for better customers? Free, no-wait reservations for card members, for example.
You want to get customers to try your restaurant-right? How about a free dessert with purchase or a free, large soft drink. Never give away or discount your key item.
Buy one, get one free. These totally reduce the value of your offering in the long term. It cuts the value of your product in half in the consumer’s eye.
Gift with purchase. I love these. Especially when the gift is not an item you already offer or sell. Free imprinted stainless bottle when you try our gym for 30 days. Free imprinted tote bag or backpack with a $50 purchase of office supplies. Free 5-song music download card with the purchase of jeans or shoes.
Think outside of the couponing mindset.
Everybody likes to save money. That is for sure.
But in order to win loyal customers, you need to offer value, quality and service– and that cannot mean having the lowest prices.
Think about the stores or restaurants that you frequent over the years.
Are they the cheapest – or do you feel good going there? I would think its the latter.
Create a positive shopping experience for your customers and they will come back.
Think “value added” instead of “lowest price”.
That is the key to customer loyalty.
