Mobile coupons: Don't discount for the sake of it

I’ve delighted to bring you this contribution from Theresa Wabler, Marketing Director at incentive solutions firm, Parago. Theresa explores a phenomenon that I’ve been watching closely — that is, discounting for the sake of it. Or, discounting where there’s no specific reason to do so. A perfect example is the oft quoted mobile marketing nirvana situation — “A user walks by a coffee shop and gets an alert on their phone to receive a discount on coffee”. It’s all very nice in concept, but the financial reality of doing this needs to be examined. Over to Theresa:

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We are in an unprecedented era for discounting and promotions. The marketing tactics, designed to lift sales of a variety of consumer electronics products, may actually erode margins if hastily designed. The lagging economy, consumer demand for deals and the rapidly accelerating promotional technology of online and mobile has led to a perfect storm that mobile retailers and manufacturers must be aware of. Enticing and dynamic promotions are now necessary to get customers in the door, but be careful not to throw out the baby with the bath water.

How we got here:

1)      The Groupon phenomena has taken deal finding to a new audience – 18-35 year old, affluent households. Groupon and its competitors have so vastly changed the consumer psyche with respect to fair market value the trend is shifting – now consumers think paying full price means they are getting ripped off.

2)      Extreme couponing has become popular enough to support a prime time television show. This represents another little nudge to the consumer psyche; paying full price means you are being taken advantage of.

3)      The economy still struggles. The Great Recession has encompassed a wide swath of middle income consumers that need to price shop now even if they never had to in the past.

4)      Technology has not slowed down. This, paired with the mounting consumer demand for deals, means that promotions can spread faster than ever before thanks to couponing websites, mobile shopping applications, daily deal blogs, social network promotions and more.

Mobile retailers and manufacturers have delivered on consumers’ voracious deal-seeking demands that have grown out of the struggling economic situation. But as more shoppers take advantage of deals, margins of the sponsoring businesses are getting taxed. Moving forward, smart mobile marketers need to begin asking for more from their customers in return for these deep discounts. The good news is that a well designed promotion will not only work for the retailer or manufacturer, but offer appealing benefits to the consumer as well.

In 2012 mobile marketers must use promotions as the catalysts for long-term engagement and ROI, versus just temporary sales lift tactics. Deep discounts will migrate from instant deals to redemption-based models like rebates or cash-back promotions, and will require consumers to engage with a brand for a period of time.

The consumer redemption requirements to get a deep discount could be as simple as a Facebook “Like” or an email opt-in, or more detailed like participating in shopping preference surveys. This will give marketers the opportunity to collect critical consumer data, and provide new touch points for ongoing interaction. Plus, consumers hungry for deals seem willing to go that extra step: according to 2011 Parago research, more than 70% of consumers are willing to opt-in for additional emails when redeeming a reward.

Over the last few years this has worked well on Twitter and Facebook, where brands require customers to engage online to receive exclusive discounts. Research from Empathica shows that six in ten consumers follow at least one brand via a social network and forty percent do so to search for deals.

Next year this linking of promotions to information gathering will need to expand more concertedly beyond social networks and become a strategy for mobile retailers and manufacturers to reach all deal finders, on and offline.

Theresa Wabler is director of marketing at Parago, a provider of rewards-based incentive solutions. She can be reached at Theresa.Wabler@parago.com.