There is no debate. Retail has largely been an anonymous and aggregate game. The public sale is pervasive and perpetual, and the arms race to deeper discounts was in full swing during the holidays. But, some of this past season’s sales results suggest there may be fatigue in this model. Our recent Holiday Study suggests that good old brand loyalty may play a more important role in holiday shopping than previously believed. With over 40% of a retailer’s sales happening during the holidays, it’s a critical time to attract new customers, but also key is to focus on retaining existing customers who often account for 55-70% of sales.
It is said that it is better to give than to receive; this may be true, but results from our study of 1,046 Americans found that when consumers buy gifts for others, their own brand preferences play a huge role. Two-thirds (66%) of consumers said they would shop at their favorite retailers over the holidays, and 44% will buy their favorite brands for gift recipients. Further, 41% tell us they choose to shop for gifts where they can earn loyalty rewards. With holiday gift budgets up over last year at $770, Americans were definitely in the mood to give, but they were also looking to receive.
Let's dissect the notion of giving and receiving. A gift is defined as something given voluntarily, as to show favor toward someone, honor an occasion, or make a gesture of assistance. Frankly, I’m not sure most retailers were really in a giving mood this past holiday season. Were the many deals really such a gift? How meaningful is a gift that's offered up to everyone? To strangers? To tourists? The sheer barrage of discounts, and the onslaught of percentage symbols, debases the act of giving to a carpet bombing of brand-damaging discounts. At the time when stores are busiest, most retailers are offering the same “gift” to their best customers as they are to people who may have never set foot in their stores before. Some gift.
And let’s talk about what it means to receive – to be the recipient of a gift. There's a lot of connotation to that word, 'recipient'. It suggests you're familiar, even known to the giver. It suggests that you're in regular contact, and eager to have something of value delivered to you personally. For that gift to be well received, it should not only be individually addressed to you, it should be relevant to your interests – and different than anything else you've received.
Can we say that about the holiday discount blanket approach? Is that the best our brands can give?
A gift to our customers, and their friends and family, should be more valuable than the additional discount that our competition is gritting its teeth to offer up, and our margins already can't absorb. And why do our best customers still have to elbow and fight for holiday deals with the faceless masses? Aren’t loyal customers owed more than this?
Our giving can come in the form of convenience, time-savers, ease and comfort of shopping with us. Airdrop lists in-store for someone else to pick, while customers have a coffee to relax. These people should receive the best version of the brand in moments like this and, sure, maybe a relief on price that they've worked toward all year. This is clearly not what happened during the holidays; 31% of consumers say customer service during the holidays is WORSE than usual. While holiday discounts will always be appreciated, benefits and special treatment for our loyal customers can be the best gift of the season – without eroding brand worth, or margins. And in the busiest shopping season of all, we might even identify more customers who find that kind of thing supremely covetable.
How many quarters will we have to pay for the ghostly visits of holidays past? All for transient customers who may never return for any other reason than the almighty discount. How many holidays will we regret getting carried away with the mechanical momentum of trying to out-spend each other in advertising our larger percentage discounts? When will we decide if these are public sales for tourist customers, or if they’re for our most loyal and almost loyal?
Because I think consumers ended the debate this past holiday season: ‘Tis better to receive something more than just a given discount.
Remember, brand loyalty is a two-way street. Think about how you can extend the love all year round to build differentiating, personal and more profitable relationships with your most valuable customers. A great start is Bond’s latest whitepaper – Retail Loyalty: Five Alternatives to the Endless Cycle of Discounting.