Retailers: Don't Get Stuck in the Deep Discount Dilemma

Five Digital Strategies to Wean Shoppers Off Discounts

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Retailers are running scared. In every sector, from apparel to electronics to groceries, they're afraid of becoming the 40%-off brand. Shoppers are so trained to wait for discounts that the slippery slope has become an avalanche.

Digital has been part of the problem. Mobile apps make it easier for consumers to "showroom," compare prices and hunt down deals; omnichannel retailing means thousands of low-overhead e-storefronts compete with the mall. Consider this: An Accenture study found that 46% of consumers plan to make more purchases online in the future. Meanwhile, a study by Google found that 84% of smartphone owners use their phone to help them shop while in the store. The good news is they buy more; the bad news is, they're using those phones mostly to compare prices (53%) and find offers (39%). Alas, digital has become the gateway to discount addiction.

But digital enables the solutions, too. Consider digital tools to deliver something that means as much --or more -- than price. Make your brand about the value add, not the cents off.

Here are five digital strategies retailers can use to wean shoppers off discounts:

1. Loyalty 5.0. Build a relationship by using rewards to reinforce habits. For retailers, loyalty apps and digital transactions make it easy to track purchase continuity. For customers, it makes the purchase a habit that feels rewarding and convenient. Take, for example, the Starbucks app on your phone. Makes it so easy. Starbucks' app has 10 million users and mobile accounts for 11% of all payments.

Safeway and Walgreens get high marks from packaged goods marketers for their loyalty-based apps. Safeway's app lets shoppers scan barcodes to order home delivery and see their purchase history (online and in-store) to shop fast. Walgreens' app refills prescriptions via barcode scan, schedules clinic appointments, and prints photos from smartphones, Facebook and Instagram. Sure, there are coupons too, but value-added services build loyalty and traffic without giving away the store.

2. Backstage pass. Make your customers feel special through exclusivity. Experiences capture the imagination -- the more exclusive, the better. American Express has done it brilliantly for generations with special access for members and entry to the "inner circle." AmEx has mastered its music platform -- this year's "Membership Experiences Concert Series" puts Macklemore & Ryan Lewis and Florida Georgia Line in small venues for cardholder-exclusive concerts -- and amplifies them with digital extras. Likewise, its "American Express Unstaged" live-stream concerts pair breakthrough artists playing at landmark venues with influential filmmakers who direct the live streams and connect online audiences to the live shows in unexpected ways through digital and social media.

3. The shopping moment. Be next to the cart, so shoppers think of you at decision time. Geo-targeting tools like iBeacon let you coordinate the conversation as shoppers stroll the aisles. Browsing the shoe department? Here's a gift-with-purchase offer, delivered to your smartphone. Digital allows delivery of timely, tailored content when shoppers are most receptive.

More than half of all shoppers globally want to be able to access services in-store via mobile devices, Accenture found. Consider geo-targeting to offer customer service -- personal shoppers, private trunk shows, gift wrapping, tailoring and gift registries. Make value-added offers -- not discounts. And beware of overkill. A few chimes on her smartphone are fun; too many gets tedious.

4. Pictures, personalized. A picture is worth a thousand words, especially when it mirrors home. Ikea and Home Depot apps use augmented reality to show how that couch, door or lighting fixture will look in your living room. If you can picture it already in your home, you're pretty much sold.

Meanwhile, Lowe's is getting high marks for its "My Lowe's" feature, which tracks past purchases -- what color paint you bought for the living room last year, what size filter your furnace needs -- to provide an automatic, personalized record.

5. Mash up clicks with bricks. Put familiar devices in unexpected places. Touch-screen technology lets ecommerce retailers reach mall shoppers and brings laundry soap to life in subway stations. Over the holidays, eBay tested touch-screen technology that turns shop windows into checkout counters: Shoppers browse goods via storefront windows, then purchase items via mobile phone.

The best opportunities are in consumer electronics, apparel and home improvement stores. Accenture found that shoppers are "webrooming" (shopping online, then purchasing in-store) more than showrooming -- relying on retailers to curate their choices for them.

In an omnichannel world, with omnimedia content consumption, retailers have a lot more options than slashing prices. Digital can help drive them.

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