The value of deals and discounts

Exploring the right – and wrong – ways to go about offering deals, discounts and free gifts to customers

Deals, discounts, offers and freebies are tools which many businesses utilise for a plethora of reasons. That reason – and, crucially, the way in which the deals are marketed – will have a marked effect not only on the outcome, but also on how your business is viewed.
Companies use deals, discounts and gifts to reward customers, to bring in new business, to retain old business and to get rid of excess stock – to name but a few scenarios. While the idea of receiving something for free, or for less, is always appealing, it’s also often distrusted; what is the ulterior motive for making such an offering? And is that deal or gift even something that you want?
“Do discounts and free gifts drive sales? In the long run, I don’t believe they do,” says Tim Crabtree, CEO of Abbotts. “I strongly believe that what customers always want is value for money with a transparent offer, coupled with a long-term relationship.”
That’s not to say that special offers and free gifts aren’t a good idea. “They do matter, but they need to be used wisely and appropriately,” Tim continues. “There is no such thing as a free gift; it will always be paid for somewhere or somehow.”
A discount on a sizeable or repeat order is an example of using the concept of deals wisely. Such a move not only comes across to the customer as a gesture of good faith, but also inspires a two-way sense of loyalty that could help to ensure a long-term relationship. If a customer feels rewarded and valued for spending their money with a specific dealer, it stands to reason that they’re likely to return.
James Mckeever, head of sales at Sovereign, believes that thinking hard about how offering deals and discounts come across to the intended audience is vital. “Deals and free gift promotions as a marketing strategy can be viewed in several ways – the most common, frequent and cynical comment being, ‘They only give it away if they’re not doing well’.
“Whilst that may be true on occasion, how deals and promotions are presented to the end-user is as important as what the deal actually is in order to ensure it’s received in a positive light.”
This potential cynicism may quite often stem from the fact that the traditional office products industry is, undeniably, slowing down. The dealers surviving and thriving are those which recognise the need to diversify. “Traditional office supplies dealers are now seeking to protect their existing business with clients by moving beyond the old boundaries of stationery, furniture and print in order to fill every possible gap in their customers’ requirements,” says James. A commendable move, but the real value lies in how then to communicate that diversification – and, yes, there are better and worse ways to do it.
For many of these dealers, giveaway-type marketing is being used as a tool to advertise the breadth of services they are increasingly offering – but there is the potential here that this comes across as merely boosting short-term sales rather than looking to the future with those new services. James believes that dealers need to put as much thought into how to present their deals and discounts as they do into which products to promote in order to ensure that the marketing does its job in advertising the business as one which can provide expertise and solutions.
“E-mail shots of such introductions can be useful, but their value will only be fully rewarded by direct follow-up selling to the buyer in conversation, whether that be via focused telesales or direct sales force route,” he says.
Colin Streeter, head of trading at Office Power, adds that the most important questions dealers need to ask themselves are what to discount and how deep to go. They already know what they want – to target the right offers to the right customers – but it’s how to go about it that’s in question. Targeting customers correctly is, Colin says, “…only possible if you understand them and their buying patterns.”
Colin believes in a data-led approach to this, with the use of a CRM system to analyse buying patterns in order to ensure the deals and discounts are being directed to the right place. He also believes that introducing offers on products that customers aren’t yet buying can prove more valuable than giving them discounts on what they already buy. “Segmenting your customers will also increase the likelihood of engagement and help you to target the right customers and position the promotions the right way,” says Colin.
“For example, you could group together customers who are not buying a certain product category from you and target them with a specific offer. This type of promotion will stop unnecessary margin dilution, help to increase average order size and deliver incremental revenue.”
Dealers should, however, avoid discounting on commodity products to non-loyal customers, or on slow-moving products as this further dilutes the margin; they should also exercise discounting caution in relation to special items with high operational costs and fast-moving commodity products to loyal customers – unless it’s likely to drive a behavioural change – according to Colin.
“At the end of the day, what a customer – or potential customer – wants and needs is a supplier who can support them in the purchase process,” adds Tim. “Time is money, so they need to be confident that they do not need to buy from multiple sources and ‘do deals’ every time they place an order.”
Tim admits that those discounts or ‘rewards’ on regular orders certainly can help in long-term, professional relationships, however. “Loyalty is all too lacking in business these days,” he says.
What is clear is that deals, discounts and offers can be useful tools if used correctly and with real focus. “The most successful use of these things comes, not from bombarding clients with flyers and e-mail shots, but from a focused, well thought-out approach to consider what the goal is, what the product that supports it is and then analysing the result of that targeted approach before moving to the next person,” says James.
Of course, every so often, it’s that one free box of chocolates with orders over £50 that can make a business come back to you – as James himself discussed as part of Sovereign’s profile in June 2018’s Dealer Support – but is that truly the basis of a strong relationship? Realistically, dealers need to find out, not just what works best for them, but what works for both new business and established clients. Chances are there will be a balance to strike which contains elements of Tim, James and Colin’s expert advice but, before discovering what works for you, the starting point should always be to ask yourself: ‘How do I want customers to view my business?’
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