Stop discounting – How to add value instead and build loyalty.

January 12, 2009

We have already seen in my previous blog that online sales are very robust even in the teeth of a recession.  Companies have used a myriad of marketing techniques to entice users to buy usually with excessive discounts.  It’s now the task of keeping those customers and encouraging repeat buys.

It’s well known that discounting does not engender loyalty necessarily and so retailers need to find other ways to add value.

First lets see what customers actually want:

EMEA survey

A recent study by EMEA concluded that the two biggest factors, likely to influence consumer spending during a credit crunch, are competitive prices (79%) and a combination of good prices AND good customer service (72%).

Retailers relying on brand pedigree, product uniqueness or reputation to see them through the downturn in spending may come unstuck as these were listed as the three least influential factors.

In a recent New Media Age survey consumers said:

89% believe internet has better prices
68% said online was cheaper (taking into account ancillary costs of “outside” shopping
81% said Internet offered wider range
89% cited ease of finding items
95% cited ease of comparing prices

Where the Internet could improve
74% said lack of waiting made high street attractive [Personnally I’ve never understood why retailers cant offer next day delivery if items are ordered before a certain time]

70% said customer service was better on the high street [there’s so much to say about this that I will write a separate blog post about this]

So customer service (combined with customer service) and lack of waiting are key elements that customers want.  Lets see what other retailers are doing to respond to this.  I am assuming that if you run and e-commerce site that you have already covered the basics: free delivery, free returns, properly organised website with your telephone number and security in place etc..

We have scoured the Internet to see what successful retailers have come up with in terms of building customer loyalty and service over and beyond the usual discounting:

Customer service – Delivery
It’s always baffled me that retailers still think it’s ok to take 5 days to arrange delivery.  Next day delivery should be standard for most products. ASOS have made a start on this at least by offering Saturday deliveries at no extra cost as well as offering a next day service.  With 74% retailers citing this as making the high street more attractive I would have thought this should be the most pressing thing for most retailers.  Use a branded delivery service that can represent your brand.

Customer service availability
Zappos, an Online retailer that specializes in selling apparel and shoes has been able to grow from $1.6 million in 2000 to $597 million in revenue last year alone. Some of Zappos’ highlight features include their excellent customer service and a free overnight shipping on all orders. Over the past 8 years.  “We`re continuing our focus on service, which includes 24/7 customer service, free overnight shipping and free return shipping with a 365-day return policy.”

Customer service – communication
Letting customers know its coming – If you’re sending something bulk then why not call ahead to let the customers know. do this and it’s very effective as people will tell other people about the great service.

Customer service – Know what your service is.  99% right is not enough
Make sure your Website is 100% accurate. Zappos ran into trouble when it used to have the manufacturers drop-ship orders, because their inventory was often off and created backorders and unhappy customers. Even 99% is not good enough.

Increasing loyalty
Amazon – Amazon Prime  – Amazon Prime is an exclusive membership program that gives you and your family the benefits of unlimited One-Day shipping on eligible purchases for an annual membership fee of £47.97. During your one month trial, you will enjoy all the benefits of being an Amazon Prime member.

Understand FREEMIUM – the concept of making money out of giving things away for FREE.  This is not for eveyone but you need to understand the power of it. What ever you are selling think of what can be given away for free which will add value to your proposition. Give your service away for free, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc., then offer premium priced value added services or an enhanced version of your service to your customer base.” viz google, facebook – read more

Communication – The ability to communicate with your customer base is now as important as ever. The ability to get your message to your clients quickly and efficiently can translate into large profits. Blogging, mailing lists and participation in social networks can and do make a difference. Again using the example of Zappos over 400 members of staff use the microblogging service Twitter. This gives the company the ability to contact thousands of people in an instant about offers or new products. The CEO of Zappos alone has 35,000 people watching his updates.

Discount vouchers being sent with each delivery. Whilst constant discounting is not the direction to go in, it’s good for encouraging viral sales.

Membership – get 15% off for life once you reach a minimum spending limit (bronze) then 25% silver etc.

more to follow…as we find them