How we became hostage to discounts, promotions, bonuses and cashbacks…
I have long wanted to write a “devastating article” about my hatred of endless discounts, promotions, cashbacks and loyalty programs, why this is bad and what alternatives there are…
Summary: at the beginning there is a lot of hate, and towards the end there is a lot of constructiveness.
For several years now, I have had a strong impression that 90% of marketing, advertising and creative activity, and the lion’s share of “visual communications” of business with clients in the Russian Federation (and not only in the Russian Federation) is built almost exclusively on various discounts, promotions, programs loyalty, and in the case of banks – cashbacks.
Open almost any banking application – in the most visible place, more than half of the screen space will be occupied by banners / placards with various “special offers”, and the necessary / useful functionality is difficult to find, it is given little space and is hidden somewhere in the depths.
Or, for example, let’s open the Ozone marketplace application – if you scroll through it, then about 80% of the total screen space on all pages will be devoted to discounts / promotions / recommendations / special offers. And at the same time, for example, there is no clear functionality with a list of orders; orders are given a small “carousel” on the last page, sandwiched between a kaleidoscope of blocks with banners and special offers.
I am a client of many banks, more than a dozen, including foreign ones. I am a VIP client in several banks. And what surprises me, and even irritates and enrages me, is the obsession of banks (including foreign ones) with cashbacks. When you go into a banking application that you haven’t used for a while, the first thing you do is be attacked by the “select categories for increased cashback this month” dialogue, which cannot be ignored and you have to select some categories.
Personal VIP managers also call/write every month: “select categories for increased cashback this month.” I’m almost ready to pay extra, just so that I don’t get bombarded with these questions and dialogues.
Also, in 90% of bank advertising, the stated “value proposition” revolves almost exclusively around cashbacks.
Often it’s even a shame for banks that manage trillions of rubles of money, have a huge infrastructure (offline and IT), a bunch of useful products, but judging by their advertising campaigns, almost the only “membership” of which is the size of the cashback they provide.
Why is this annoying?
Firstly oversaturation of this informationwhich is given so much screen space and advertising time.
I would venture to suggest that this is a consequence of the specific idea of many marketers about the content of their work (instead of focusing on the task “let’s describe how good the product is,” focus on the task “we need to come up with a promotion, without a promotion they won’t buy”).
Even while working at REG.RU several years ago, communication with the PR department periodically caused me bewilderment – many of the company’s marketers sincerely believed that they were paid money only for this or that their job was just to come up with every day, new promotions and magic formulas like: “1+1”, “3+2”, “take two domains – get hosting for free”, “get hosting and SSL – domain for free” and so on ad infinitum.
Even as a representative of the development department at that time, such “activity” of our “marketers” gave me a complete headache, because all this “promotional” creative had to be somehow taken into account in the business logic of the order/cart/billing, etc.
To realize all these fantasies in a good way, it was necessary to create a separate monstrous “promotional” software engine in which all this intricate promotional / discount logic and thousands of these more and more new rules could be written.
That is, often business does not think about how to give more value client, and marketers are not thinking about telling people about this valuebut about showing that you save money.
And this devaluation and distortion of the perception of the real value of products.
Promotions and discounts as a symptom of business superficiality
Many companies, instead of working on the uniqueness of their products or services, focus on reducing prices.
You can think about why businesses choose this approach:
Don't know how to make a good product?
They don't know how to show value product?
Don’t know other marketing and sales tools besides creating the feeling of “I saved money”?
Do they believe that the main factor in people’s choice of what and where to buy is price?
Do they strive for quick profits in this way?
Don't have a long-term marketing and product strategy?
Are they trying to retain the client by any means necessary?
Do they think that the only and main tool of competition (even between banks) is to measure discounts and cashbacks?
Consumer psychology: how discounts manipulate our consciousness
The chapter is about how discounts and cashbacks influence buyer behavior and make them forget about the real value of the product.
Stock addiction – this is when buyers get used to the fact that purchases are made exclusively during sales, discounts or promotions. It shapes the habit of focusing not on quality or needsA for the opportunity to saveoften buying something you don't really need.
From my own experience, I can state that choosing any product that has some significance for you, especially a relatively expensive product, is often a difficult and slow task.
This is a “multi-criteria optimization” process, when you take into account many factors and characteristics of the product, some of which are a plus for you, and some are a minus, and each characteristic has its own weight and importance for you. Often, choosing a product is a complex and lengthy process that can take minutes, hours, or even days and weeks (in the case of expensive purchases).
If we add here the factor of price optimization, if price is a significant limitation, the choice becomes even more complicated. But for many ordinary people, several more factors are added to this task:
Is it possible to buy at a discount/promotion?
what discount cards do I have? (as a result, I will not go to the nearest supermarket, but the one that has a discount card),
What kind of cashback will I receive and through which card should I buy?
All this further complicates the choice and, as a result, the choice often becomes suboptimal, since the psychological factor “found on sale” often outweighs/interrupts all other rational factors and considerations and people buy not because the product suits them better, but because “on sale” “
In general, businesses shift people’s choices from the point of optimality to the point of “feeling like a bargain” (often a false feeling, since it is not always worth believing the “crossed out number” with the old price).
Now about cashback – many Russians, against the backdrop of all this cashback craze, have a whole scattering of cards from various banks – each for its own cashback category.
I myself often see a scene at the checkout in a supermarket, when someone spends half a minute rummaging through a wallet among a dozen cards in search of the “right” card for exactly this purchase with the “right” cashback.
Add here all sorts of “Ozone” and “Wildberries” cards, for which there are also discounts on these marketplaces – and the system becomes even more complicated. How much additional mental effort and micromanagement is needed to optimize your transactions with this scattering of cards and additional task conditions…
Personally, I don’t want to spend a lot of my mental energy and time trying to save that notorious X% on a purchase, and not because I’m “oversexed” and “I can afford not to think about expenses.” No, I just value my mental energy, I have somewhere to spend it, and I have always behaved this way, long before I could afford not to think too much about money. I just don’t want the difficult choice of a product to become even more difficult because of these additional “discount” factors and to shift from the optimal point of choosing a product that is right for me. That is, I want me to make a choice in favor of a product because I think it suits me, and not just because some brilliant marketer or machine “at the other end of the business” decided today to give a discount (or the appearance of a discount, which is most often).
By the way, about “discount visibility“- it will probably come as a surprise to few people that this is often precisely the “visibility” and “crossed out” price somewhere on the marketplace – this is just an abstract fictitious figure and the product has never been sold for this money before (not only from them, but also from competitors). Often this is just a cheap and primitive way to persuade someone to buy, creating a feeling of “benefit”.
Thus, all these discounts and promotions have become not a way to optimize your purchases (optimization in a broad sense, not only the price, but also the qualities of the product and how suitable it is for you), but simply part of intrusive marketing and psychological manipulation.
Examples of such behavioral traps: “fear of missing out” (FOMO), “limited time effect“and other marketing manipulations.
For example, 5-10-15 years ago, every “information businessman” who teaches how to sell promoted the technique “limited time– “buy now, otherwise tomorrow it will be more expensive.” As a result, on every first landing page there was this “ticking counter”, and most often it was a hoax, because if you go to the same site at any other time from a different browser, the counter starts again)
For me personally, this has always only caused disgust and I believed and continue to believe that a serious and self-respecting business should not use these dirty tricks and “black patterns”.
In general, all these techniques and manipulations reduce attention to the quality of products and services, attention to how suitable they are for you. They also transfer business/brand communication with a potential client to a lower and more primitive level in every sense and respect.
The harm of discounts and loyalty programs for business and the economy
Declining brand value: Frequent promotions and discounts can lead to the fact that goods or services begin to be perceived as low-quality.
When a business, including through its visual communications (on websites, in applications, in stores, in advertising), places the main emphasis on discounts rather than on the quality of the product, the value of the product in the eyes of people decreases and the business falls into the trap of continuing to focus on his selling tool will be the price factor alone.
Discount wars between retail chains — only large chains win, and small businesses can’t stand it. And large retail chains are also not in the black because of these “discount wars”, I’ll explain why.
Based on their game theory, these discount wars will sooner or later involve all the actors in the market who can afford it from a technical point of view. And in the end, these retail chains will still not differ from each other in this parameter – all the same, they will all have +/- the same loyalty program.
For all these discounts, promotions, points, bonuses and loyalty programs, businesses/retail chains lose a certain percentage of their margin/markup (according to various estimates, from 5% to 20% of margin).
My proposal as a techno-idealist: if retail networks INSTEAD OF all these multi-level and difficult to administer shares and loyalty programs just plain would reduce the cost of all goods by a certain percentage (equivalent to the percentage that this discount program “eats” on average from them), then it would be:
would significantly simplify life for IT specialists/programmers of these companies and simplify administration,
it would significantly simplify the life of clients who do not need to manage dozens of different cards and carry out a lot of mathematical calculations in their heads to optimize their purchases;
would create an image understandable transparent company in which goods Just cheaper (emphasis on the word Just);
So, why not abolish these loyalty programs, and Just make goods cheaper? And to differ from each other not by the loyalty program (which will still be similar for all major players, since there is an arms race on this parameter and it will still not be possible to differentiate much thanks to this), but by something else, essential?
For example: “our stores have no visual frills, but all goods are cheaper”, “ours are a little more expensive, but everything is expensive and rich and they will offer you coffee”, “ours are a little more expensive, but there is a huge assortment and good consultants who will help you choose the product,” etc.
These are clear messages that can be conveyed to people. And let clients choose what is closer to them: cheap and cheerful or expensive and rich. A clear, intelligible and simple proposal.
Alternatives to discounts: how businesses can survive and attract customers
There are many examples of successful brands and companies that, instead of focusing on discounts, promotions and loyalty programs, concentrate, for example, on:
product quality,
affordable prices,
wide range,
quality support,
fast delivery,
premium service,
environmental friendliness and product safety, etc.
Important invest in reputation, innovation, design And customer experience.
How to Develop Loyalty Without Discounts: Loyalty Programs That Are Based on Customer Value, Not Savings
(Thanks to ChatGPT for some thoughts and talking points in this section.)
Focus on creating an emotional connection with the brand.
Instead of attracting customers through discounts and promotions, a brand can develop deep emotional connections with customers through mission and values. Example: Brands that support sustainability, social responsibility, or are active in local communities can attract customers who share their beliefs. This creates loyalty based on shared values rather than short-term gain. Example: Patagonia.
Personalized loyalty programs.
“Loyalty” here would not manifest itself in the form of bonuses deposited into a personal account. Instead of offering the same discounts and incentives to everyone, brands can create personalized programs that take into account the preferences and needs of specific customers. This could be personalized service, exclusive access to new products or events, personal offers, but not related to savings. Example: Sephora.
Customer experience and service.
High level of service and customer satisfaction. If a customer feels valued and treated with respect, they will be willing to come back again, even without discounts.
Example: Zappos (online shoe retailer) has become known for its excellent customer service. Customers return to them not because of low prices, but because of their exceptional service, including free shipping and returns, friendly customer service and fast problem resolution.
Rewarding loyalty with experience, not savings.
Instead of giving bonuses in the form of discounts or cashbacks, you can offer customers valuable rewards in the form of unique services or exclusive experiences that they can’t get anywhere else.
Example: American Express offers its customers access to private events, concerts and special offers for cardholders, which stimulates loyalty and desire to use the company's services.
Continuous product improvement.
Loyalty can be based on continuous improvement of the product or service itself, where the customer understands that each new experience will be better than the previous one. This encourages them to stay with the brand on a long-term basis because they are confident in its commitment to growth.
Programs based on social impact.
Programs that support charitable causes or social causes allow customers to feel like their choices are contributing to a good cause. Customers become loyal not for economic gain, but to contribute to solving important problems.
It's time to focus on value, not price.
Appeal to consumers:
Let's look more at value product or service and to what extent the product fits exactly for you. And all this tinsel with loyalty programs, discounts, promotions and cashbacks is just meant for you distract from the optimal choice, take your mental energytime and attention. As a result, you won’t save much, but at the same time your choice will be manipulatively shifted away from the optimum.
Also let's develop conscious consumption – that is, the targeted acquisition of only those things that are really necessary and meet your real needs. And not because “Oh, there’s such a discount/promotion, how can you pass by and not buy!”
Call for businesses:
Instead of “manipulating crossed out numbers” and leading nowhere competition between the same loyalty programs for all, let’s give and broadcast to people the real value.
There are many ways, including those described in the previous section, how you can attract a client and to be better than others more civilized, smart (smart), modern and in socially responsible ways, rather than simply using primitive gimmicks better suited to a Hindu bazaar.
Conclusion
In my idealistic opinion, the culture of discounts and cashbacks should give way to quality and reasonable consumption.
It would be great if businesses reconsidered their marketing strategies, and consumers stopped falling for primitive tricks.
