Chart: How businesses are making discounting more strategic

Time and again, the internet has allowed for the blooming of challenger companies with distribution or product strategies that mean similar items can be offered cheaper than at established brands.

Initiatives by the Trump administration and the EU to close or modify rules that allow the cheap import of goods from abroad mean governments are now taking seriously the impact on businesses in their own countries.

New research from Harvard Business Review and promotion software company Talon One shows that when it comes to discounting, companies are increasingly using technology and data to find ways to make it work for them.

In a survey of 420 businesses, the report found that 75% of respondents said they were not going to change or increase the volume of mass discounting they do in the year ahead. Nearly half (49%) said the same about investing in promotions or discounts.

That said, nearly two-thirds (65%) said that they would be increasing their focus on the profitability of the discounting they do. In short, most of these companies no longer see discounting as a blunt instrument but as more of a strategic tool.

Half of the companies also said they were looking to increase their focus on personalised offers. In the second chart below, you can see how that could play out with companies that have a customer loyalty programme. Most of these businesses are planning investment in their schemes, expanding them or looking at ways to make them more profitable.

Not all of these companies are retailers; in fact, the majority are not, but the data is a clear demonstration of a trend that industry observers have seen playing out.

A great example in the UK has been the predominant mode of supermarket discounting being ‘loyalty prices’. Customers get reduced prices in exchange for their first-party data, which has allowed grocers to expand their retail media offerings.

One of the reasons it has worked has been the huge incentive that customers have to save money on their weekly shop. It is not that easy for all retailers, particularly when the need does not feel as visceral.

Roughly a third (32%) of the businesses surveyed cited customer data issues and the same share said that technology/software issues are a barrier to getting personalisation in the shape that they want. The possibilities are huge, but implementation is never necessarily easy.