AMAZON DISCOUNTS AND LOYALTY: THE WAY FORWARD?

Following the news that Amazon plans to top Black Friday with its new “Prime Day” loyalty programme for current and new Prime members Ian Horsham, divisional director of promotions and incentives at The Grass Roots Group. Ian focuses on whether it is effective for retailers to offer discounts in order to retain loyal customers, and entice new ones.

The news that Amazon is hoping to top Black Friday by launching a new global shopping event, “Prime Day”, is a significant example of retailers relying on discounts to further entice loyal customers and expand their customer bases. Whilst this event will only be available to those on the £79 a year Amazon Prime account, new customers are also entitled to a 20 per cent discount on the annual Prime membership fee if they sign up before Tuesday. However, this does pose the question which should be on every UK retailer’s lips; is simply discounting really the way forward for customer retention?

When considering an innovative approach to rewarding loyalty, a retailer shouldn’t just revert to discounting the value of their products as an enticement strategy, as by their nature, reductions should only be utilised as a short term approach for selling longstanding inventory or time sensitive merchandise. Cutting prices to induce consumers is not the most beneficial tactic for businesses that pride themselves on the value of their products and could impact on the long-term brand value, as well as reeling in fickle customers who may disregard their ‘loyalty’  if they spot a better bargain elsewhere.

Dropping prices for a short time is nothing different to programmes already in existence, and whilst Amazon has considered a more exclusive approach, with new features to follow, to improve its loyalty programme, it should firstly look to satisfy the customers that regularly flock to its doors. This could be by surprising them with unexpected offers to enhance the perceived value, in return for their loyal custom. Successful loyalty programmes that consider a more holistic approach appealing to the requirements of individual shoppers, and what they really want, will no-doubt give businesses a more grounded and consistent customer base.