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GUEST COMMENT Stop following the Black Friday discounting crowds: Three steps to driving loyalty with the right customers

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With the cost-of-living crisis rumbling on, Black Friday and Cyber Monday are an absolute godsend for many people. With enough forward planning, it’s possible to buy the majority of your Christmas presents at a discount. It’s little wonder then that the average Millennial plans to spend almost £200 during Black Friday 2024. While there are clear benefits for consumers, Ben Warren, retail business manager at Sagacity, asks: what impact do these shopping holidays have for retailers?

Ben Warren, retail business manager, Sagacity

Black Friday was brought to our shores by Amazon and Walmart (when it owned Asda) just over a decade ago. The American giants offered blockbuster deals to UK consumers and proved phenomenally popular over the following years, leading pretty much the entire industry to follow suit and offer their own deals.

It works well in the US, picking up the baton off the back of Thanksgiving. But in the UK it just does not make sense. So why are UK retailers giving away precious margin at the start of the busiest shopping period of the year?

Taking a step back
Retailers need to stop and analyse what – if anything – they get in return for the Black Friday discounts they are offering. The most common reasons for discounting items are clearing stock, building customer loyalty, and placing a stake in the ground to drive sales.

But taking a step back, often Black Friday is not the right time to offer blanket discounts for many retailers. First and foremost, they don’t need to clear stock with Christmas just around the corner. As McKinsey warns, marking down items that are performing well, and are likely to sell at full price, damages profitability.

Blanket deals for Black Friday will also do little to nurture long-term customer loyalty: often retailers find deals attract bots, which flood customer databases with thousands of fake emails. Meanwhile, discount codes are often shared on ‘deals’ websites, meaning fewer customers will share their details directly with the retailer. This double whammy makes it increasingly difficult to engender loyalty with the right customers. 

More often than not, blanket discounting will likely do more harm than good.

Three steps for a bespoke approach
Retailers need to break the cycle. It does not matter if competitors are still offering Black Friday deals – they need to stop following the crowd. Here are three steps retailers can follow to devise and launch a more targeted strategy to drive loyalty with the right customers:

  1. Stop treating everybody the same. Retailers need to put their customer databases to work, joining the dots to see the bigger picture. By analysing key data points such as how often people make a purchase, and how much they spend, retailers can start to segment the customer base. This will enable them to move beyond treating everybody as a common mass.
  1. Focus on Big Spenders. Next, retailers need to decide which customer groups matter the most. Starting at the top – most retailers have a group of big-spending, loyal VIP customers – and will want to maintain these relationships, so they continue to feel the benefit over the longer term. There will also be a segment of occasional spenders, who could become more valuable if they could be persuaded to spend more regularly. Ultimately, retailers need to emerge with a clear picture of who to target and how to nurture them.
  1. Take action to move the needle. Now it is time for retailers to act – taking a tailored approach. For example, they might invite VIPs to exclusive events, give them early access to the latest products, or give them personalised gifts, to ensure they feel appreciated. For occasional spenders, meanwhile, they could turn to gamification, making regular shopping a game – hitting weekly targets to unlock a monthly prize. There is still room for discounting on occasion – using dynamic and bespoke pricing to target new customers, for example – but only as part of the wider mix, with a targeted approach that maintains a firm focus on building a strong customer base.

Reaping the rewards
The days of indiscriminately giving away margin for little-to-no return simply have to end. By taking a more bespoke approach and drawing on the power of data to focus on the most important customer segments, retailers will be able to maintain and nurture the right groups to drive up customer lifetime value. In turn, they can move forward confident they are proactively working to create a strong base of loyal big spenders.

Ben Warren, retail business manager at Sagacity


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