Retailers may be missing out on building a loyal customer base as they focus on prepping for the upcoming Cyber Monday (Dec. 1), research from Coherent Path Inc. shows.
Results from the study suggest that new customers who are offered an initial purchase with a discount or special offer have only a 50/50 chance of becoming a repeat customer. This creates challenges for the retail industry, but there’s also opportunity to shift mindset about how to attract customers online.
"A first-time Cyber Monday customer who purchases something that is marked down may not be as valuable over time as someone who goes online three days later and purchases a product at full-price,” Dr. Greg Leibon, CTO of Coherent Path and a resident scholar in Mathematics at Dartmouth College, said in a university news release. “The reason for this appears to be the motivation of the consumer. Our data shows that when price plays a significant role in the first-time purchase with a retailer, even online, the chance of them becoming a long-term and loyal customer can be low."
Many retailers bank on promotional offers and deep discounts to attract consumers to commerce sites, especially during the holiday shopping season, but that customer investment strategy may not be paying off long-term. Data shows that customers who purchase an item online at full price are actually more likely to become a repeat customer. These customers also tend to be those who spend more per visit since they aren’t necessarily looking for those sharp discounts.
“Over the lifetime of the relationship, a customer whose first interaction with a retailer does not involve a discount is worth at least 2.5 times more than a customer who responds to a short-term discount or promotion,” Coherent Path’s research report concluded.
James Glover, President and CEO of Coherent Path, elaborated on this philosophy.
"It makes sense that customers who pay full price on an initial visit can be worth more over time, but I think the impact this trend has on overall customer loyalty gets lost, especially around holidays,” Glover said in the news release. “Strategies to attract customers with lower prices can be near-sighted and fail to inspire valuable relationships that last into the New Year. The good news is that loyalty can increase if the initial sale is followed up with personalized engagement that guides customers from being one-time discount shoppers to more frequent ones."