High discounts attract "cherry pickers" who don't return for second purchase

Customers who are offered a discount of 30% or more are less likely to buy from a brand again, research has revealed, giving retailers food for thought as they head into the Christmas season.

Slashing prices to attract new customers may bring a short term gain but often it only serves to attract "cherry pickers" who won't return for a second purchase, unless they are offered a similar level of discount again.

Data from customer engagement specialists Optimove, which analysed the behaviour of more than 1m shoppers over two years, suggests that offering a lower level of discount, from 5%-30% does help "charm" customers, with the chances of a customer returning for a second purchase increasing up to the 20% mark. After that the customer is more likely to be a short-term bargain hunter with little brand loyalty.

“Over the holiday period, retailers are waging all-out war for new shoppers, but acquiring one-time shoppers is extremely costly, especially when retailers use price slashes as a major acquisition strategy," said Optimove managing director for EMEA Alon Tvina.

“The victory of acquiring a new customer may well be hollow: customers making the most of large discounts on offer over the holidays can end up hurting profit margins quite substantially, if they don’t become more regular shoppers," he added.

Tvina added that the holiday season was the perfect opportunity for brands and retailers to acquire new customers but they need to employ smarter discounting strategies that demonstrated a "deeper understanding of different types of customers and their behaviour".

"Using discounts smartly to attract customers and keep them, will give marketers an opportunity over the coming months to convert one-time buyers into loyal, returning customers. But to do this they will have to look at the data, testing the impact of marketing strategies on customer engagement rather than short-term sales, and adjust offers accordingly," he advised.

Last week it was revealed by Mintel that Black Friday – the discounting period at the end of November that has been adopted by many UK retailers from the US – is increasingly turning shoppers off. The research group said 28% of shoppers did not believe the discounts were "genuine" and almost half (49%) spent less during Black Friday, and its online equivalent Cyber Monday, last year than they were expecting to.