Wall Street Journal Explores How Retailers Should Use Discounts

Dec, 30 2014

We worked with Shelly Banjo from the Wall Street Journal on a piece about how retailers should use discounts. The Wall Street Journal added a piece of consumer research to accompany the article that was very interesting. They asked what email headline would get consumers to open an email from a retailer.

Consumers agreed that they are most likely to respond to an email that is advertising a specific (read: relevant) item on sale, not to generic discounts.

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We think this strongly validates the thesis that consumers want retailers to differentiate which message they sent to whom.

Even a modest discount will get a shopper to buy, as long as it is for the right product.

This means that retailers need to build individual consumer profiles and make individual product recommendations at the right time, with the right amount of discount. It's not about the biggest amount of discount. This is a win-win for the consumer and the retailer. The consumer gets the products they want and the retailer will end up with greater profits.

In fact, AgilOne research shows that:

Retailers who differentiate discounts on a shopper-by-shopper basis will experience twenty percent greater profits.

AgilOne conducted a similar study not so long ago and also found that 75% of consumers demand some form of personalization by retailers. See this study here.

We have long said that the days of one size fits all marketing are over and that the way to shoppers wallets is to deliver value. Delivering value means delivering the highest relevancy, not necessarily the highest discounts. Different shoppers want different things.

Our CEO Omer Artun explains in the article: A fifth of online shoppers are considered true “discount junkies,” people who make purchases only when plied with discounts, according to new data from AgilOne Inc., which works with 150 retailers to analyze customers’ purchases and predict their behavior. About 15% of shoppers generally pay full price for items and don’t bother searching for sales.

“Smart retailers understand discounting only moves the needle for a portion of their customers,” said Omer Artun, chief executive of AgilOne and a former marketing executive at Best Buy Co.

“You don’t want to offer discounts to full-price shoppers, because over time your profit margins will erode,” he said.

AgilOne customer Donald J Pliner is also quoted in the article:

Shoe brand Donald J Pliner, which is sold online, in department stores and through an eponymous six-store chain, divides its customers into three types based on their previous shopping behavior: Discount shoppers who buy clearance items and last season’s styles once they are priced at more than 25% off; full-price shoppers who rarely buy clearance items; and customers who fall somewhere in between.

The divisions dictate to whom the brand touts clearance sales and which customers receive catalogs showcasing new full-price products.

And of course we couldn't agree more with the final statement by Chris Orton, chief marketing officer of sports website Fanatics.com and former president of Orbitz.com, when he says that retailers will continue to parlay the data they have to get the most out of shoppers:

“At this point next year, there won’t be two identical emails going out to customers”.

Read the full article here.