Effective Promotions and Discounts: How to Properly Segment Customers
The classification of discounts and promotions by form and duration are the main criteria that influence the format of the discount and the choice of the business’s marketing strategy direction.
However, it is very important to correctly assess the main customer category, as well as possible directions for attracting other population groups.
Discounts and promotions by customer group are marketing strategies aimed at providing special purchasing conditions for certain groups of buyers based on their characteristics or behavior.
They are offered to customers depending on their affiliation with a particular group (for example, loyal customers, corporate clients, students, seniors, etc.). They can be fixed or depend on the volume of purchases, purchase frequency, and other factors. For example: discounts for loyal customers, student discounts, or wholesale purchase discounts.
Promotions that target specific consumer groups are designed to encourage them to make purchases. These can be time-limited discounts or bonuses. For example: seasonal promotions for new customers, special offers for corporate clients, such as discounts for placing large orders, or a “Refer a Friend” promotion — discounts for customers who bring in new buyers.
Such discounts and promotions help businesses increase customer loyalty and stimulate repeat purchases.
The main types of discounts and promotions by customer group include discounts for loyal customers, discounts for new customers, personalized discounts, and discounts for specific population categories.
Discounts for Loyal Customers
Discounts for loyal customers are one of the most popular strategies aimed at increasing customer loyalty and encouraging repeat purchases.
Loyalty discounts create a sense of value for the customer, which can lead to increased brand commitment and repeat purchases. Such discounts can motivate customers to return for additional products or services, thereby contributing to an increase in sales volume.
Offering discounts for loyal customers can help your business stand out from competitors, especially in highly competitive markets. If loyalty discounts are linked to referral programs (for example, a discount for bringing in a new customer), this can also contribute to attracting new buyers.
Discounts can be offered based on purchasing behavior, allowing for more precise targeting and personalization of offers.
However, loyalty discounts can also reduce profits on each item sold, especially if the discounts are too large. This can be a problem for businesses with low profit margins. Additionally, customers may become accustomed to discounts and expect them all the time. In this case, they may avoid making purchases without a discount, making the business vulnerable to changes in pricing strategy.
Loyalty discounts may also cause dissatisfaction among new or less active customers who do not receive the same benefits.
For effective implementation, it is necessary to develop a loyalty management system, which can be a labor-intensive process, especially for small businesses. Frequently offered discounts can lead to a reduction in the perceived value of a product or service if customers begin to see them as standard rather than exceptional offers.
Overall, discounts for loyal customers are a powerful tool for retaining and increasing purchases. However, Beautier recommends carefully analyzing, planning, and configuring the loyalty discount system to avoid harming the profitability and reputation of the business.
Discounts for New Customers
Discounts for new customers are a strategic approach aimed at attracting new buyers and encouraging their first interaction with the brand.
New customer discounts can serve as a powerful incentive for their first visit or purchase, especially if they are attractive and beneficial. Offering a discount on a first purchase can help rapidly increase the number of customers, which is especially important for new or small businesses that need to grow quickly.
Special offers for new customers help generate buzz around the brand, which can attract the attention of potential buyers and improve the company’s reputation. For many customers, especially those who doubt the quality of a product or service, a discount on their first order can be a decisive factor in making a purchase. New customer discounts can also serve as a strong foundation for marketing campaigns, social media advertising, or email marketing. When a new customer makes a purchase, you gain access to their contact information, which can be used for future marketing activities.
However, offering significant discounts to new customers can substantially reduce profits from initial purchases, especially if the discount is too large.
Customers who are drawn in by discounts may become dependent on them and avoid making purchases without similar offers, which can reduce overall profitability in the long term. A new customer may not become a loyal buyer, even if the discount on the first order was attractive. This is because a discount does not always guarantee long-term commitment. Sometimes, discounts attract people who are not the target audience, and therefore, they do not bring long-term benefits to the business. This can increase marketing expenses without providing a proper return on investment.
If loyal customers see that newcomers are getting larger discounts, it may cause them to feel unfairly treated and dissatisfied. This is especially relevant if loyal customers do not receive similar benefits. It is also difficult to predict how many new customers who receive a discount will remain with you in the future. If customer retention is low, these discounts may prove ineffective in terms of long-term profitability.
Discounts for new customers can be a highly effective way to grab attention and increase the customer base, especially for businesses that are just starting out. However, Beautier recommends ensuring that such discounts do not negatively impact long-term profitability or create a dependency on promotions.
Personalized Discounts
Personalized discounts are discounts offered to customers based on their individual preferences, behavior, or purchase history. Such discounts allow companies to tailor offers according to the specific needs of each customer.
Personalized discounts create the feeling that the company cares about the needs of a particular customer. This can increase customer loyalty and retention, as customers feel valued.
Personalized offers that align with the interests or needs of customers increase the likelihood of a purchase. For example, a discount on products that a customer frequently searches for or buys can encourage them to make a purchase. Personalized discounts are generally more effective than universal discounts because they offer exactly what the customer needs. This increases the chances that the customer will take advantage of the offer. Personalized discounts are based on data about customer preferences and behavior. This not only allows companies to offer targeted discounts but also helps improve marketing strategies through data analysis.
Discounts on products that a customer frequently buys can encourage them to purchase more items or opt for higher-priced products, thereby increasing the average order value. Providing personalized discounts can make your business stand out from competitors and demonstrate a high level of service.
However, in order to offer personalized discounts, it is necessary to collect and analyze a large amount of customer data. This requires investment in technology, analytical tools, and data storage. Collecting and processing personal data also carries the risk of data breaches or privacy violations, which can undermine customer trust.
Creating personalized offers for each customer can be a complex process that requires advanced automation and customization. This may require significant effort and resources. Personalized discounts may result in substantial reductions in product prices, which can decrease profit margins. This is especially true if customers are frequently offered large discounts to stimulate purchases.
If customers become accustomed to personalized discounts, they may start expecting them with every purchase, reducing the long-term effectiveness of this strategy. Measuring the effectiveness of personalized discounts can be challenging, especially if the company uses numerous factors to shape its offers. This complicates ROI analysis and the potential to increase overall efficiency.
Personalized discounts can become a powerful tool for increasing customer loyalty and stimulating purchases, as they are tailored to individual customer preferences. However, this approach requires serious investment in technology and data analysis. Beautier recommends maintaining a balance between customer benefits and business profitability to avoid excessive discounts that could reduce margins and create a dependency on promotions.
Discounts for Specific Customer Categories
Discounts for specific customer categories are discounts provided to customers based on their affiliation with a particular group, such as students, seniors, corporate clients, or as part of promotions targeting specific market segments.
These discounts are aimed at specific customer categories, allowing companies to effectively attract the desired audience and meet their needs. Personalized offers for specific categories (for example, student or senior discounts) can create a strong sense of brand loyalty within these groups.
Discounts for corporate clients or large buyers can encourage bulk or large orders, which increases the overall sales volume.
Offering discounts for specific groups can give a company a competitive advantage in attracting and retaining customers, especially in niche segments.
Discounts for specific categories are easier to organize because there is no need to collect or analyze the personal data of each customer. It is sufficient to segment customers by category. Promotions targeting specific groups can also serve as effective advertising and a way to attract new customers from these categories.
However, discounts for specific categories can cause dissatisfaction among other customers who do not receive the same benefits. For example, if seniors receive discounts, other buyers may feel left out. Discounts for specific categories can also reduce margins, especially if the discounts are significant or offered to large customer groups. Discounts for narrow customer groups, such as students or seniors, may be less profitable for businesses if these categories make infrequent purchases or have low purchasing power.
A company can become dependent on certain customer categories, making it vulnerable if that category loses relevance or purchasing power. The need to develop various offers for each customer category requires more time, effort, and resources for marketing and campaign management.
Certain customer categories can be difficult to accurately identify, which may lead to abuse and challenges in controlling promotions. For example, people may attempt to fraudulently claim a student discount without a valid student ID.
Discounts for specific customer categories can be an effective tool for attracting target groups and boosting sales in specific market segments. However, Beautier recommends carefully balancing the benefits for these groups with the risks to profitability.
If a business does not focus exclusively on a single population category, it should be cautious with promotions and discounts for specific groups. Of course, discounts can be offered on an ongoing basis to economically disadvantaged population groups, such as students, seniors, or large families. Promotions for specific customer groups can be held in conjunction with certain holidays or events, such as Student Day or Family Day.
Consider all the criteria, opportunities, advantages, and disadvantages when conducting promotions or offering discounts, and may your business thrive!