The discount you should not have given

Singles Day pulls Black Friday. Black Friday pulls December. The discounts start earlier every season, and the pressure on retailers to move first is harder to ignore than it was five years ago. Inflation, stubborn inventory positions, and margin compression have made cash flow the nervous topic in most trading meetings.

SIVV co-founder Andrew Fisher  sees the result as a familiar pattern. "There's a temptation for retailers to offer discounts early to get runs on the board," he says. "Many retailers operate under the assumption that there's a fixed amount of revenue at stake between Single's Day and the end of the year. So, they discount, earlier and earlier, to secure their 'piece of the pie'. This is only exacerbated by the fact that Single's Day and Black Friday are pulling the festive sales periods earlier and earlier."

The calendar is partly self-inflicted

The fixed-pie assumption is worth pausing on, because it is usually wrong. Most consumers are paid several times between Singles Day and Christmas, so, as Fisher puts it, "new dollars may come into play". His conclusion is direct. "Retailers don't necessarily need to offer the biggest discount, before anyone else, to compete."

Discounting itself is not the problem. Applied selectively, as a short-term lever, it clears stock and pulls demand forward. The problem is the default setting. Fisher calls the habit of repeated deep discounting a "constant sugar-hit", and the comparison lands. It works in the short run. It builds nothing that compounds.

The better question for a CMO is not whether to discount. It is which customers the discount actually needs to reach, and which ones are being subsidised unnecessarily.

Discount sensitivity is a segment, not a surprise

In any reasonably large customer base, a portion of customers will only convert on price. Another portion will convert regardless. Deciding which is which is not exotic analytics. It is a baseline segmentation question, and most brands have the data to answer it. Fewer act on the answer.

SIVV segments customers by behaviour, including how they respond to discount. Discount-sensitive customers can be suppressed from paid media or given a tailored, margin-controlled offer. Customers who do not need a discount to convert can be left out of the promotion entirely.

"It's important to identify discount-sensitive customers so you can understand that that's all they are, and you don't keep offering discounts and 're-buy' the same customer repeatedly," says Fisher.

At the other end of the base are high-value customers who are, in commercial terms, already in. The sharper play with them is not a bigger discount. It is recognition. "Consider offering 'money-can't-buy' loyalty options for high-value customers, such as an invitation to an in-store event or some other type of opportunity that they wouldn't ordinarily get access to," says Fisher. "For example, a live chat with a product designer or an in-store fashion launch."

SIVV co-founder James Bennett takes the point to its commercial conclusion. "There's little point in offering discounts to customers that don't 'need' it."

The VIP treatment costs something. It costs less than discount, and it builds a signal in the customer base that being valuable to the brand attracts something more interesting than a sale.

The margin-safe levers are sitting unused

Once discount-sensitivity is isolated, the question becomes what to reach for with the rest of the base. Three things do useful work without taxing margin.

Scarcity is the first. In the run-up to Christmas, delivery windows are the scarcity customers care most about. Clear communication of shipping cut-offs, combined with rush-shipping options and click-and-collect, does some of the work a discount would otherwise have to do. "Make it convenient for customers to get their purchasing done sooner rather than later," says Fisher. Value-adds around delivery, such as free express on orders above a threshold, appeal to the customers retailers most want to stretch to a second or third order.

Exclusivity is the second. An inbox saturated with a percentage off is easy to ignore. Exclusive product is not. For retailers operating across physical and online channels, exclusivity can also be used to pull traffic to the channel where the margin or the relationship is stronger. Fashion is a natural fit for online-exclusive collections built around a designer collaboration. Categories that benefit from a physical setting, fragrance being the obvious one, are better matched to a store-only drop.

Channel integration is the third, and its output is the least visible because it is not a campaign. It is the ability to treat a customer who buys in-store and one who buys online as the same customer. SIVV co-founder Adam Simms puts it plainly. "Consider the customer as a customer of the brand and all its channels." Without that view, the in-store high-spender gets retargeted with a discount they did not need, and the online regular gets served offers that ignore what they bought at the counter last week. Clienteling in-store, combined with electronic receipts and connected customer records, removes most of the waste in both directions.

When you do discount, discount for a reason

Discounting is a legitimate tool. It is a blunt one, and the guidance a trading team should be held to is that every discount serves a purpose beyond shifting stock.

"Try and ensure the discount serves a purpose as well as simply shifting stock," says Simms. "Consider a 'spend-and-get' discount, where customers are incentivised to increase their average order value in order to secure a discount."

A spend-and-get construction turns a margin cost into a basket-size lift. Category-switching discounts pull customers into product areas where the lifetime value is higher. Reactivation offers target customers who have lapsed, and for whom the alternative was zero. Each of those has a commercial reason attached. Each is measurable against a control group that was not offered the discount.

The test is straightforward. If the only thing the discount did was subsidise a purchase that was already going to happen, it was not a discount. It was a transfer from the P&L to the customer.

Where the budget should go

Margin leakage on price-insensitive customers is not a promotions problem or a loyalty problem. It is a segmentation problem, solved by knowing which customers need a discount to convert, which ones do not, and which lever to reach for with the rest of the base.

SIVV retail clients = running serious customer programs at this scale have moved most of the work upstream of the campaign calendar. The trading team still discounts. It discounts a smaller part of the base, for a clearer commercial reason, more of the time. The rest of the heavy lifting is done by urgency, exclusivity, connected channels, and offers that respect a customer's existing value to the brand.

The festive period rewards retailers that can tell the difference. The next budget cycle is a good time to make sure yours can.

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About SIVV

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