By adaptive - December 13th, 2011

One of the fundamental components of an organisation’s presence on social media networks is to protect their reputations. Trust is emerging as a vital part of a business’ social media interacti...

One of the fundamental components of an organisation’s presence on social media networks is to protect their reputations. Trust is emerging as a vital part of a business’ social media interactions. Can heavy discounting on eCommerce and social commerce site lead to brand value being eroded and social media fatigue? 

If you were ever in doubt over a key motivator of human behaviour, you only have to go as far as your local big box store on Black Friday. The day after Thanksgiving has become the traditional time that large retailers in the US offer their largest discounts.

The lengths that people will go to - skipping holiday with their families, camping in the cold, and risking death by trampling – all in the name of saving money and ‘rewarding’ businesses for their favourable deals. Clearly discounting and the special offers have cemented their places in the retail environment.

Using discounts

The use of discounting is the focus of the 2011 State of Digital Marketing report that reveals 39.9% of business-to-customer companies using social media expects sales generation to be the key objective. Only 2.8% focus on building online community and a slightly larger 16.9% have made brand awareness a priority.

The blinding power, the ability to send out massive email, Twitter, and Facebook blasts with deals, coupons, and discounts, and the ability of online store owners to indiscriminately generate coupons and discounts at will has led to all manner of problems with many businesses unprepared for the traffic that a simple discount can often generate.

Of course the biggest culprit and probably the most vilified is Groupon. Take Jessie Burke, who says she lost $8,000 on a successful Groupon sale for her business Posie’s Cafe. Or Rachel Brown, whose $40 box of cupcakes was featured for $10 on the discount site and subsequently had to make 102,000 cupcakes for a net loss of $20,000.

“It’s not the number of discounts, but the way they are presented especially in the social media community that can lead to the devaluation of a brand,” says Clare Price, Content Creator for Find Your Online Voice.

Clare’s focus on the story is one that’s shared by her peers. “Inundating with discounts leads to bored, eyes glazed over followers when they could be what your business needs; fans, promoters, and friends. Create something that is generous, intelligent and timely perhaps once every couple of months or once a year and a community of faithful customers and clients will have your back and be glad you have theirs,” says Erin Giles, Marketing Coach.

For the businesses that it works for, Groupon can be a fantastic tool - but the risks to your reputation outweigh the rewards. For Jessie Burke, her experience is telling: “We met many, many wonderful new customers, and were so happy to have them join the Posies family. At the same time we met many, many terrible Groupon customers… customers that didn’t follow the Groupon rules and used multiple Groupons for single transactions, and argued with you about it with disgusted looks on their faces.”

Something for nothing

Make no mistake - hard-core bargain hunters seek out the very best deals they can find from the companies they want to patronise. Contrast this to the people who actively care about your business and your success - your core customers, who would shop with you and buy from you, even if your competitor created a gold-plated version of the same product. Most consumers probably don’t even think twice about Googling for a coupon for their favourite online store, even if it was one they used before.

What’s the worth of those invisible measures of customer loyalty that we’re giving up? Certainly occasional discounting is a worthwhile, valid, and expected strategy. But if it comes at the cost of your business’s soul - is it really worth it? When the coupon runs continuously, what’s the real value of your offering? When you sacrifice a fantastic experience for your best customers, for a decent experience at best for someone who doesn’t even know or care about you - except that they can get something novel for half price, are you doing your business a service?

Tea Silvestre, The Word Chef, puts it into perspective for us, “The real question is what is your point of differentiation? Are you trying to compete on price? Or is your goal to build authority and real value? The best way to avoid the price war is add value with free gifts rather than discounts. That way, people won't associate your product or service as ‘worth less’ than your regular price.”

Online, there are no lines. If too many customers come knocking down your door, your website goes down. If your system can’t handle the coupon, your store breaks. Customer experiences are ruined and the competition is only a click away. The hazards of discounts (especially mass-discounts) are numerous, varied, and difficult to predict.

Discounting can be highly effective if it is used as a component of a wider marketing strategy. Discounting for discounting sake isn’t a viable option for any corporation that wants to maintain its core brand values. And with social networks able to disseminate a discount code at the touch of a button, care must be taken to ensure the discounts your business does offer reach the right people.


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