Right now, lots of consumers want to find ways to save money. New research from KPMG shows that in the UK 55% have reduced non-essential spending, and 29% feel either much less secure or slightly less secure in March 2023 than they did at the start of January.

Non-essential spending is very much a matter of perception and prioritisation. For some people, it could mean reducing eating out, buying new clothes and accessories, doing fewer small journeys by car or taxi, but maintaining spending elsewhere. Meanwhile for others, it could mean not making any major purchases, such as electronics, home improvements and holidays. Some will do both. However, it doesn’t mean people are no longer buying, just that behaviours are changing and people are more savvy with their money.

The strategy for marketers and retailers is to identify and tap into buyer motivations. This doesn’t mean entering into a continuous spiral of discounting, because while a 10% discount might generate a little sales high, it dents margins and neither creates repeat business, nor loyalty.

What motivates your customers?

What the KPMG research has discovered is that when consumers are considering a purchase, they are likely to look for value and incentives. The data shows that 36% of consumers are buying more promotional items and this is where marketers and retailers can shift consumer behaviour.

Imagine the family home is in need of a new sofa and the purchase has been put off for a few years, first because Covid restrictions made shopping impossible, and then as a result of the downturn squeezing spending on essentials. But the sofa money is squirrelled away.

The right promotion can drive the consumer to action. For example, a promotional offer that includes vouchers for days out for the family might be the right incentive to show how they can spend money on an essential purchase and afford non-essentials at the same time.

This is just one example of how promotions can really help a retailer. There is a persuasive benefit and time-based incentive in the promotion that’s tied to an emotional response, tapping into the consumer’s motivation. If a consumer is ready to buy that sofa, but not feeling financially confident, they’ll be looking around for deals. The retailer who understands the mood of the moment, can win the sale. Achieving this can be very time-specific. Those family day out vouchers will be more attractive if offered at the start of the long school holidays rather than the start of a school term.

While that example is fairly obvious, getting the promotional setup right is often a complex matter. It’s not just about securing a deal that will appeal to consumers. Remember, when times are tough, the consumer’s primary motivation may well be not to buy that sofa, even if the money is earmarked for it.

And yet Opia’s own research has shown that customers are influenced to purchase by sales promotions.  In early 2021, Opia analysed a sample of circa 500,000 claims submitted across more than a hundred sales promotions across multiple markets and sectors to determine customer behaviours towards promotions.

More than eight out of 10 (84%) of customers say they are influenced by promotions to some degree, with 40% either strongly or very strongly influenced. Customers who respond to promotions tend to be those who are generally very engaged; they are actively looking for deals and can be influenced by an appealing offer. In today’s market, this is most consumers, which means there’s a receptive audience for brands embarking on new sales and marketing initiatives.

Promotions that have the most appeal, such as a gift with purchase where an attractive and relevant gift is offered with the product (a perfect example is a pair of high-end wireless headphones with a flagship smartphone) tend to drive significantly higher engagement and sign up to marketing communications (close to 50%) versus campaigns that may come across as more ‘transactional’ or even ‘cheap’, typically with a cash reward. The simple cashback offers show less brand engagement with sign up rates for future marketing coming closer to 25%.

Put customers front and centre

It might sound strange to advise retailers to take a customer-centric approach, but we see far too often that this key point gets overlooked. Understanding customers means understanding what motivates them, and this can make all the difference between promotional success and failure. No one size fits all and buyers in different parts of the world can respond differently to incentives. As such, there is no magic formula beyond the essential considerations to match the right kind of sales promotion to the sector/consumer/geography is of course essential.

Sales promotions are often most effective when multi-layered, and adapted to a commercial need: sales volumes are all very well, but not at the expense of margins that do not make commercial  sense; if it’s a new product promotion, ‘buy or try’ often works best; the higher value promotions will benefit from an expensive gift or higher cashback; if the objective is centred around increasing market share, then trading in a competitor’s brand for a new model of your own might also be an option.

You could decide to use different incentives, promotions or marketing strategies for different types of customer, for example those who are active and loyal, those who have recently switched to you from somewhere else and those who you think are prospects and might be in their research phase.

This strategy could be coupled with an understanding of the top consumer concerns of the moment – If you’re selling an electrical item, might some bundled smart energy management kit be a worthy promotional item as energy costs continue to be high, for example. Or if you are selling a TV, maybe bundling streaming services is a better option. Whether your promotion is a physical item or something delivered online, reliable fulfilment is paramount: a customer whose promotional items turn up late or don’t arrive is a very unhappy customer.

Find the right promotions partner

Once a retailer understands that discounting is a sub-optimal strategy, and promotions a good one, the next step is to put a promotions strategy in place. This is not without challenge for those who try to go it alone. We have touched on some aspects of the job, including the value of segmenting consumers by their relationship to the retailer, understanding different consumer motivations, sourcing promotional items, and getting both marketing and fulfilment right.

Moreover, promotions are unlikely to be a one-off for retailers. As they look to the short and mid-term futures, retailers may consider the market such that they need to think of promotions as a regular part of their business. Partnering with an experienced third party who can advise, source the right promotions at the right price, ensure fulfilment, manage the customer relationship, help with metrics analysis and act as a true partner could be the ideal strategy.  Make the right partner decision and your promotional activity will bring profit and nurture customer loyalty.