Streeeeetch your Discount Budgets … and your sales

The popular American show, "Good Morning America" recently shared a killer tip for online shoppers – ostensibly to maximize the discounts they get from the e-tailer. The story goes this way: Login and load your items onto the cart, close the browser and sit tight. The retailer comes screaming back in a couple of hours with a magic offer sometimes as high as 20% to encourage repurchase and you got a significant discount potentially for doing nothing but waiting a couple of hours. Do this for the same product across 5 different sites and pick the best suck..err retailer's offer and voila tout - you get to pick a fab deal.

Given the holiday season and a potential $1.5 billion online revenue expected from Black Friday, the deals and the purse strings are expected to come in fast and loose. As a modern marketer, you know the strategic value of a lifecycle marketing program beyond just the transactional revenue from the conversions – it is about customer engagement, relevancy, the consumer lifecycle and really the way a customer experiences the brand. Three interesting questions arise for the judicious marketer interested in optimizing promotional spends with increased sales uptick.

Who need discounts as a "prod to purchase"?
What is/are the right level of discounts for these consumers?
Who would have purchased without a discount anyway?

The last of course, is a direct hit to the budget's bottom line. There is more than one way to skin a cat but one solution is to use consumer past actions typically a combination of purchase and engagement behavior to structure differential discount rates across customers. The following table indicates a hypothetical discount structure. The idea is to provide maximum discounts to win back the Vanishers and the "Cat on the wall" customer while optimizing discount rates for the "Regulars" & "Loyals"

As you move on with your new "One Sized Discounts Fits None" journey, you will find opportunities to tweak the matrix to the level of optimization your business demands. For example, empirical weightages for different behaviors and eventually a simple formula for computing optimal discount offers for different segments would be a great vision to have as you get started on the "Segmented Discounting" process. Don't forget to measure how things pan out though!!