Price promotions might not always be a strategic mistake for brands — a new study has found discounts, loyalty points and experiential rewards can boost customer loyalty.
The paper, published in Advances in Consumer Research, investigated how promotional strategies — specifically, price discounts, buy-one-get-one offers, loyalty points, and experiential rewards — affect people’s emotional attachment and loyalty to brands.
The researchers distributed an online questionnaire to 520 consumers through retail partner mailing lists — across various categories — and targeted social media ads. The questionnaires employed a Likert scale (a psychometric scale measuring the agreement or disagreement levels of participants) to measure respondents’ attachment and loyalty, asking them about repeat purchase intentions, willingness to recommend the brand, and affective or psychological connections to the brand.
According to the results, price discounts were the most common promotional approach, and customers exposed to this strategy reported significantly higher loyalty scores than those who did not receive a discount.
Loyalty points and experiential rewards also boosted customer loyalty, and both strategies outperformed buy-one-get-one offers. The researchers shared that strategies promoting emotional engagement led to a ‘stronger and more enduring impact compared to purely monetary incentives’.
‘For marketers, the results underscore the need to view promotions not solely as short-term sales drivers but as strategic tools for building brand loyalty,’ the study authors advise. ‘Incorporating emotionally resonant elements into promotions can create stronger consumer-brand bonds, leading to sustainable customer relationships.’
While this study supports the use of promotional strategies to strengthen customer loyalty, there are numerous disadvantages to discounting.
‘All too often with price promotions, marketers are pulling forward a sale that would have happened in the future or would have happened anyway at the higher price point,’ Mark Ritson, founder of MiniMBA, wrote in Marketing Week.
Ritson further explained that cutting prices can damage brand image, train customers to wait for discounted prices before making future purchases, signal distrust in one’s own products, and lead to user disillusionment.
So, while promotional tactics such as discounting can lift short-term sales and loyalty, brands should still think twice before slashing prices.
Featured image: Derek Lee / Unsplash