Discounts have always been a go-to strategy for attracting and retaining customers. When competition heats up and capturing customer attention becomes more challenging, many brands fall back to using discounts because they’re a tried and true way to get results.
But here’s an uncomfortable truth: discounts don’t generate real customer loyalty. While price cuts might give you short-term sales growth, being overly reliant on them can quickly lead to being trapped in a dangerous cycle.
The costs of being discount-dependent
The problem with excessive discounting is how it erodes your brand’s perceived value and hinders long-term business growth. Regularly cutting prices can train your customers to expect constant sales, making it less likely they will pay full price for products down the road. This can damage your brand prestige over time as customers begin associating your brand with cheapness instead of more favorable qualities.
Another downside is that customer loyalty built by discounts is extremely fragile. Price-motivated customers are highly likely to abandon a brand for another with a better deal. Brands that try to compete on price can suddenly find themselves in an ongoing race to the bottom that reduces profitability.
Break the discount cycle: how to switch to value-based loyalty
Why do so many brands remain trapped in a discount cycle? Usually, it’s because they’re following outdated playbooks, trying to mimic competitors, or fearing backlash and lost sales. However, moving away from a discount-heavy approach doesn’t require eliminating promotions altogether but changing how they’re used. Instead of being your primary customer retention and acquisition tools, they’re used to support your overall loyalty strategy in hyper-focused ways: to reward your best customers, drive product trials, move surplus inventory, and so on.
Breaking free of being discount-driven enables you to build stronger and more valuable customer relationships. After all, you want your customers to stay loyal because they genuinely prefer your brand and not just because it’s the cheaper option. To help, here are 3 strategies to help you make the switch to value-based loyalty.
Reframe your brand’s value proposition
A value proposition is more than just a buzzword. Your brand’s value proposition defines what sets you apart from competitors, including what value you offer to customers beyond price. Consider what differentiates your products or services: Is it better customer service? Superior features or capabilities? Product quality? A vibrant customer community? Take a look at customer feedback or reviews: What do customers say they love about your brand or products? What terms or phrases show up most often in positive comments?
These are the values you want customers to associate with your brand instead of price. Once you have them defined, you can incorporate them into messaging and conversations around your brand to help increase awareness of those values to your wider audiences.
Segment customers by motivation
Price isn't the primary motivator for every customer. Some customers have other priorities that influence their shopping decisions, such as convenience or reliability. Rather than giving the same basic discount to every customer, you can use personalization tactics to send tailored discounts for customers based on what truly motivates them. Using data analytics to segment your customers by specific motivations allows you to send targeted offers that align with their shopping habits. For example, convenience-focused buyers might respond more favorably to subscription models that save them time and money over traditional discounts. Aligning shopper motivations with incentives allows you to replace broader, margin-eroding discounts with smaller, more effective offers.
Take a strategic approach to reducing discounts
When you’re ready to switch up your discount strategy, one approach you shouldn’t take is eliminating all your discounts overnight. A far less risky strategy is to scale back in phases by gradually reducing discount frequency and depth. For example, instead of running a blanket 15% discount all the time, you can switch to a more targeted discount every other month or limit the offer exclusively to specific user segments, such as high-value customers or lapsed shoppers. Constantly test each phase and monitor customer reactions so you can adjust and refine your strategy as needed.
Discounts can give you quick wins but fall short of providing long-term success when used alone. The goal behind breaking free of discount dependency isn’t to eliminate discounts but to use them with intention so they support your business goals rather than eroding your margins. Switching to a value-based loyalty strategy enhances your brand perception and protects profitability by building relationships with customers who choose your brand for the value you provide and not just for price. And that’s a competitive advantage no discount can buy.
Who is Brandmovers?
At Brandmovers, we help industry leaders design and implement high-impact loyalty strategies that go beyond discounts to create valuable, lasting customer engagement. With a cutting-edge platform that connects customer value delivery tactics (promotions, loyalty, incentives, rebates, etc.), Brandmovers’ clients gain true 360-degree insights and strategies that drive real results. Contact us today to learn more about how we can help you build a strong, more profitable loyalty strategy.
