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    OPM and Moderator Chuck Hamrick's Avatar
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    April 5th, 2005
    Park City Utah
    The Deal-First Shopper: Who They Are and How to Sell to Them
    Interesting summary of the deal mentality:

    Merchants are facing a new phenomenon: the “Deal- First” shopper. These shoppers make purchase decisions driven more than ever by price. What factors gave rise to this new breed of shopper and how have their shopping habits changed? And what will the next-generation of deals need to drive sustainable growth for merchants?

    To understand these shoppers and how to sell to them, we must first understand three converging trends.
    1. The recession has hit home. Consumers have become permanently value-conscious as saving money has become a necessity. In a down economy, loyalty and rewards cards become increasingly popular. In fact, in the past decade, the total number of loyalty memberships in the US has more than doubled, and the average household has gone from being a member of 12 to 18 loyalty programs.
    2. Saving lost its stigma and coupons became cool. Coupon clipping and redeeming is actually now a prime-time TV show. Google searches on “coupon” and “deal” are up more than 300% since 2004. Before Groupon, could you have imagined pulling out a coupon at the end of dinner at a fancy restaurant?
    3. The adoption of smartphones and tablets have made it easier than ever to price shop and channel hop. Now, when you walk into a retail store, you can instantly access an unprecedented amount of information in secondsright at your fingertips.

    These trends have created a shopper who thinks “dealfirst” when making his purchase decisions. Deal-first shoppers are armed with more information than ever before, and are increasingly price shopping and channel hopping as they make buying decisions. This new shopper type has had a profound impact on the purchase cycle and the retailer’s control over it.

    In the past, consumers went through a traditional cycle: need recognition, information gathering, evaluation of alternatives, purchase decision and transaction. Once a shopper saw an ad, realized they had a need for a product, and entered a store, the retailer had a far greater ability to use deals to drive the purchase.

    Today, this is no longer a linear cycle. Today, deals themselves drive “need recognition”, helping shoppers gather information (think about the fun daily deal write-ups you read), and eliminating evaluation of alternatives (using tricks like scarcity or group buying to drive urgency).

    It’s so easy for the deal-first shopper to access deals, they can essentially skip ahead and shortcut the purchase decision process. This leaves today’s online and in-store merchants in a bind – looking for new ways to drive acquisition and loyalty without giving away margin.

    Some merchants are responding with beefed-up loyalty programs, attempting to thwart one-time deals from pulling customers away. But the deal-first shopper isn’t loyal to a program – they’re loyal to the best, most valuable deal for each purchase. The savviest consumers are now double dipping, finding the best deal or discount they can find from a retailer, and topping it off with points, cash back or miles on their rewards card.

    Other merchants, invoking the “if you can’t beat em, join em” strategy, are experimenting with the fleet of new deal types at their disposal: daily deals, flash sales, check-in deals, and the like. But many have realized these new deals are plagued with the same set of problems as traditional coupons:

    No targeting. Retailers are unsure whether their daily deals, flash sales, or check-in deals are helping to acquire new customers, or just rewarding existing customers who might have bought anyway.
    The loop remains open. Today’s new deals are also hard to track, making it difficult to close the loop and prove long-term ROI. Retailers need to know if these deals are working to drive sustained acquisition or loyalty, and not just delivering one-time customers who don’t come back.
    Not sustainable. The third and most concerning reason the current model isn’t working is that it’s hurting the bottom line for merchants – because deals are not building loyalty or profit. Time-based, or one-time promotions can create a large influx of shoppers- but many businesses can’t handle the strain on resources. And the steep discounting expected means there is very little room for profit.
    Given all the problems with the current deal model for merchants (and consumers), yet recognizing consumers’ growing appetite for deals & discounts, the question is:
    Do merchants have an alternative that will allow them to remain competitive yet sustain profits and retain customers?

    Deals 2.0 – selling profitably to Deal-First Shoppers

    For today’s deal-first shopper, deals have to be relevant, easy to redeem, in the currency shoppers care about and entirely “frictionless”. And deals have to work for today’s multi-channel merchant too, helping not only to acquire new customers, but also increasing basket size and frequency of visits. Better data and tracking information could help merchants sell more effectively to deal-first shoppers. CRM strategies such as segmentation, targeting and personalization, can now be applied to deals, giving merchants more transparency into their customers. Improved redemption and tracking – online and offline - can create a closed loop for merchants - not only tying a purchase to a specific customer, but also tracking that consumer’s behavior over time.

    A new marketing channel that motivates customers to buy with offers linked to the top cards they use, and rewards they collect is creating common ground between Deal-First shoppers and savvy merchants. Dubbed “cardlinked marketing”, it meets the requirements for the next generation of deals.

    The first truly frictionless promotion, card-linked offers are linked to the point of payment, connected to the rewards consumers value most and are digitally redeemed – so no vouchers or breakage. Card-linked offers leverage actual consumer transaction data that pinpoints exactly where consumers spend to target offers to the right consumers. Tied to shoppers’ credit and debit cards, card-linked offers help crystallize the full picture of a consumer’s wallet.

    Linking offers to cards finally closes the loop for merchants by tying each offer to a customer’s spend over time - not just their spend with that merchant, but across the merchant’s category. Merchants get access to anonymous transaction data to prove impact on customer acquisition, order values and repeat purchases. Finally, card-linked offers provide a way to incent all types of shoppers with currencies they care about, and they offer merchants a way to provide profit-sustaining, rebates instead of huge price cuts or discounts that cheapen brands and cause customer service issues.

    In summary, today’s Deal-First shopper and the profitable merchant can indeed be symbiotic creatures. Smart marketing – without discounting - can translate into value, relevance and convenience for consumers – even those whose purchase decisions are driven more than ever by price. By re-thinking and re-inventing the Deal, we can help to power a sustainable, growing economy – at the local and national level. Now that’s a deal.

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