Ah, Cyber Monday is here: the peer pressure fuelled day when all retailers mutually agree to cut their profits and encourage their customer’s addiction to discounts and promotions.
I know that sounds a bit pessimistic, maybe even downright harsh, but hear me out.
There are really only 2 reasons why a retailer would offer Cyber Monday promotions: to gain new customers or reactivate old ones. Let’s talk about what deep discounting does in both situations:
Acquiring New Customers: Suppose a man offers a woman $1,000 to go on a date with him. She accepts. How much of a chance do you this couple has at a long term, quality relationship? Any business transaction based on bribery (and let’s be honest, that’s essentially what discounting is) only produces low-quality, low-affinity relationships. Customers acquired through steep discounting are far less likely to rebuy unless a similarly steep discount is offered again. If you’ve ever run a lifetime value calculation on these customers, you’ll undoubtedly find that it’s much lower than your typical customer LTV. (If you’ve never run this analysis on your customer database, please do yourself a favour and run it!) When discounting is the foundation of the relationship, future price increases are simply out of the question.