Why Discounts Don’t Create Loyalty Anymore (Recognition Does)

Offering discounts has been a go-to method for many retailers to encourage their customers to return. £5 off your next shop. 10% off this weekend. Spend £50 and get £10 off.

Discounts of course create urgency and encourage a purchase and they still have an important role to play, but there is a problem with relying on them to create customer loyalty. A discount can give a customer a reason to purchase but it doesn’t necessarily provide a reason to stay loyal.

Today, customers increasingly expect something more personal. They want to feel recognised, understood and valued and that’s where the next generation of loyalty programmes comes in.

Loyalty is About More Than Saving Money

Price is always a key consideration for consumers, particularly in recent years with household budgets being squeezed ever tighter, and a strong offer can be the difference between purchasing or walking away.

But it’s important to differentiate between customer retention and customer loyalty. If your customers are only returning because you have offered them a discount, what happens if a competitor offers them a bigger one?

For customers that are focused on price, the outcome is invariably the same: they will take the bigger discount. They can be loyal to the discount, not the retailer.

True loyalty goes beyond mere discounts. It is built when customers develop a relationship with your business and they feel that their custom is both recognised and appreciated. That could mean being offered exclusive event access, receiving a reward on their birthday, personalised offers based on previous purchases and being treated differently because they are a valued customer.

The reward, and any discounts, become part of a wider experience rather than the entire reason for returning.

Recognition Creates a Stronger Relationship

The leading loyalty programmes are increasingly moving away from generic discounts and becoming more focused on personalised customer experiences.

That means using customer data to understand behaviour and using that valuable insight to make the customer experience more valuable and relevant.

For example, a garden centre could identify a group of loyalty customers customer who regularly purchase plants and send them a relevant seasonal offer such as a half price houseplant or recognise a high-value customer with an exclusive event invitation.

This requires businesses to understand who their customers are, what they value and what might encourage them to return and this is why a powerful CRM is such an important part of modern customer loyalty.

Your Loyalty App Must Do More Than Store a Digital Card

A loyalty app should be much more than a replacement for a physical loyalty card.

When integrated with a CRM and existing ePOS system, it can become a powerful way of bringing customer data, communications and rewards together.

Our Response Works platform supports everything from loyalty points and tiers to money-off vouchers and segmented incentives with deep customer insight based on purchase history. It can also integrate with existing data sources, helping businesses create a more joined-up view of their customers to create a much bigger opportunity.

Instead of sending the same promotion to everyone, businesses can start communicating based on behaviour to target and reward higher value loyalty customers. Instead of waiting for a customer to accumulate enough points to redeem a reward, businesses can create timely reasons to engage.

And instead of measuring loyalty simply by the number of members registered, they can look at frequency, spend, purchase history and lifetime value to more effectively drive customer engagement.

The Real Value Is In The Data

One of the biggest benefits of a modern loyalty programme isn’t actually the reward. It is the data-driven customer insight behind it.

Your customers tell you what they want through their purchases and every interaction can help build a better understanding of what customers buy, how frequently they visit and which products or offers encourage them to purchase.

That data can then inform rewards strategy and marketing activity across email, app and other channels. A different proposition is needed for a customer that hasn’t shopped for six months compared to one that shops weekly. Relevance matters and the result is businesses being able to transition from mass-marketing towards more relevant, timely and targeted communication and offers.

A customer receiving an offer for something they actually want feels very different from receiving another generic 10% off voucher. It gives the impression that ‘we know you and value your custom’ rather than ‘we just want your money’.

Discounts Still Have a Place

Discounts shouldn’t be overlooked. Many consumers are understandably price-conscious and money-off rewards, promotional offers and points multipliers can be highly effective when they are used strategically.

The difference is that discounts should become one element within a broader loyalty strategy, rather than the strategy itself otherwise customers can quickly become conditioned just to wait for offers and that can make it harder for them to justify a full price purchase.

The objective should be to use incentives intelligently: rewarding the right behaviour, encouraging repeat purchase, increasing engagement and giving your best customers reasons to stay connected and buy into your brand in the long-term and a loyalty app is the ideal way to bring all of this together – using customer data, personalised rewards and timely communications to create more meaningful interactions that keep customers coming back.

Recognition is The Future of Customer Loyalty

The businesses that understand the importance of recognition have a significant opportunity. Customers don’t want another loyalty scheme that gives everyone the same offer. They want value that feels relevant to them.

That means combining loyalty strategy, CRM, customer data insights and technology to create experiences that are genuinely more personal. At Redfish Group, we help businesses do exactly that.

Our loyalty apps and Response Works CRM connect customer data with meaningful rewards, personalised communications and measurable commercial outcomes. From loyalty strategy and segmentation through to app development and ePOS integration, we create loyalty programmes around the needs of each business and its customers.

The future of loyalty isn’t about giving away more margin. It’s about giving customers more reasons to feel valued and when customers feel recognised, they have a reason to return.

We work with retailers and ePOS providers to deliver connected loyalty solutions that drive measurable commercial results. Whether you’re looking to launch a loyalty app or introduce digital rewards from scratch, get in touch with us today to start your journey with Redfish Group.