Jay Jaffin from Blackhawk Network argues that traditional discounts and sales drive purchases yet fall short in establishing lasting customer bonds.
In today’s retail landscape, your target audience is flooded with marketing messages across platforms like email, social media, and more. With the average person seeing roughly 5,000 ads per day, it can be challenging to capture attention. That’s why promotions remain a valuable tool for standing out and engaging customers—particularly during the winter holiday shopping season.
Our research has found that almost half of consumers said they plan to change their shopping behaviors this holiday, with a key focus on value and deals; a third of respondents surveyed reported planning to buy more products on promotion. However, relying solely on traditional discounts or coupons to drive checkouts won’t build lasting relationships. Instead, a rewards-based strategy—such as rebates—can turn a single interaction into a long-term dialogue that enhances customer loyalty and drives repeat business.
The drawbacks of traditional promotions
Discounts, sales, and coupons have long been effective tools for attracting consumers, and with inflation and economic concerns top of mind, their appeal has only grown. In fact, two-thirds of U.S. shoppers have cut back on spending, making them more responsive to promotions. This explains why 78% of retailers still rely on discounts, and 64% use rewards.
But one-time promotions like discounts offer little insight into customer behavior after the initial purchase and don’t provide the data needed to refine future marketing efforts. Additionally, in today’s price-sensitive market, your discount risks blending in with similar offers from competitors, leaving little opportunity to create a meaningful connection with your brand. Plus, according to researchers, nearly a quarter of loyalty program professionals worldwide across various industries say their biggest challenge is offering deep enough discounts to attract customers without sacrificing brand reputation. Luckily, rebates and reward-based promotions can still offer your customers the added value, while forgoing the deep, costly discounts that also discount your brand’s prestige.
Retailers looking to engage and retain customers this holiday season should set aside the one-time discounts and coupons, and look to rebates and reward-based promotions. Here are three reasons why they are the strategic option.
1. More opportunities to personalize
The more you incorporate rebates into your strategy and maintain ongoing interactions with customers, the more valuable insights you gain to fine-tune future marketing efforts. By building a robust customer database, you’ll be better positioned to foster deeper relationships, ultimately turning one-time buyers into loyal customers and even brand advocates.
This wealth of information provided by customers that complete the rebates process allows you to craft highly personalized promotions based on customer segments, locations, preferences, and more. For instance, when a customer purchases a car, retailers can offer them rebates on related items, like a GPS system or car detailing services, enhancing their experience with their new vehicle.
This information is crucial, as over half of consumers in Australia, the UK, and the US say that a brand recommending products based on previous purchases makes them feel like the brand knows them.
The opportunities for targeted promotions are endless, but they depend on the customer insights that go beyond simple discounts. Without this data, your promotional efforts remain limited to one-off transactions instead of building lasting connections.
2. Promotes long-term engagement
Consider the difference between a one-off discount and the ongoing engagement a rebate can create. A one-time discount gets people through the checkout process but leaves you with no follow-up opportunities unless they come back to your brand. With rewards-based promotions—such as “purchase this item and receive a $25 reward card”—you open the door to learn more about your customers and establish multiple points of contact after an initial purchase or interaction.
When you send the rebate, they engage with your brand a third time, and the positive association of receiving a reward builds loyalty. Fifty-four percent of consumers are likely to return to a brand after receiving a rebate, and 55%—including 64% of millennials and Gen Z—spend their rebate at the same store that issued it, offering further touchpoints for engagement.
While both a $25 rebate and a $25 discount offer the same value, the long-term benefits of rebates far exceed the immediate perks of discounts. Rewards encourage customer retention and more frequent repeat sales.
3. Minimizes the post-holiday markdowns
Consumers want assurance that their purchases are worthwhile and high quality. Since rewards don’t actually discount purchase prices, the brands offering rewards are seen as more premium options compared to brands that frequently discount their products and services.
Offering rewards instead of traditional discounts can significantly elevate your brand’s perception. While discounts may appeal to budget-conscious shoppers, they can sometimes give the impression that a brand needs to lower its prices to attract sales. On the other hand, rewards maintain the full purchase price, positioning your brand as a premium option that doesn’t need to rely on price cuts. Plus, utilizing rewards and rebates can help retailers avoid the steep post-holiday discounts often required to clear unsold inventory, preserving brand value while still encouraging sales.
Rebates offer a strategic way to avoid slashing prices at the end of the season. Instead of deep discounts that are costly and can devalue your brand, rewards-based promotions entice consumers to make full-price purchases by offering something extra in return. This not only reduces the pressure to clear stock with massive markdowns but also ensures that your products retain their perceived worth.
Incorporating rewards-based promotions into your holiday strategy offers numerous advantages over traditional discount-driven approaches. Traditional promotions, while effective at generating one-time sales, offer limited long-term benefits. In contrast, rewards like rebates help you build lasting connections by encouraging repeat purchases and brand advocacy. They also allow you to collect critical customer data, enabling personalized promotions tailored to specific segments and behaviors.
Source from Retail Insight Network
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