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Like all retailers, direct-to-consumer (D2C) brands have one main goal: to sell as much as possible. However, these companies face a challenge that not all retailers encounter. They need to attract, convert, and retain customers in an entirely online environment without the support and exposure that retail partners provide. Many brands that get their start selling directly to consumers engage in brand partnerships with brick-and-mortar retailers to expand their brand presence in the real world and create a stronger impact among their target audience, but there are other ways to tempt customers and drive sales. Two of the most popular and time-tested methods are discounts and promotions. While they may sound similar, they're two very different strategies.
Here is a closer look at the difference between a discount and a promotion, and when D2C brands should use each one.
Discounting is a specific kind of promotion and is the practice of reducing the price of a product below the standard retail value to trigger an increase in sales.
The psychology behind the discount strategy is pretty straightforward. People like to feel like they got a bargain; they enjoy the social perception and, of course, the actual savings that come with making a smart purchase. Plus, discounted offers are tied to scarcity, whether it’s a limited-time offer or there are only a limited number of products available at the lower price. This creates a sense of urgency for potential customers that can only be satisfied by purchasing the product now.
Discounts are an irresistible sales tactic, and there are various ways D2C brands can leverage them. Here are the most common types of discounts:
Reducing price: The most standard form of discount is to reduce the cost of the product. For example, either by a percentage like 20% off, or a cash amount like $10 off.
Multiple purchases: Many D2Cs offer discounts on purchases of more than one product. This could be in the form of “buy one, get one free,” or 20% off the purchase of two or more products, for example.
Combination deals: Discounts can include combo deals, which means the purchase of a prearranged combination of products will be cheaper than the purchase of each item individually. For example, a Bath & Body Works customer could buy just a scented lotion, or they could get a bundled deal on a lotion and a shower gel for a lower price than if they purchased each item separately.
Discount on future purchases: Offering a discount on a future purchase is a tactic designed to ensure the customer returns to make a repeat purchase. It may be less effective than a standard discount offer since it deters customers who are only interested in a one-time purchase.
Free shipping: According to UPS, 43% of D2C customers consider shipping costs when researching products online. Free shipping is a simple way to offer a discount. However, D2C brands also need to remember that, for many customers today, free shipping is expected and may not necessarily be perceived as a discount.
Promotions are a range of tactics designed to pique awareness and interest in a brand or product, create a buzz, and drive sales and revenue. For promotions to be successful, they must add value for customers. When done correctly, promotions can even help boost the long-term perception of a brand.
While discounts refer only to the price and actual sale of a product, promotions are far more varied and include a wide range of marketing and sales tactics that can start before someone even considers becoming a customer. Here are just a few examples of the types of promotions D2C brands can employ to increase sales and enhance brand value:
Coupon codes: Offering coupon codes for discounts and exclusive deals is a popular tactic for e-commerce brands. Rather than just applying a discount on products for every customer, no matter what, coupon codes can be sent to specific customers, like those signed up to receive email alerts, for instance. The online transaction helps the company track the customer journey from the retrieval of the coupon code through the product purchase. It is also a great way to collect customer email addresses and other information for future campaigns.
Another advantage of online coupons is that they are instant. The customer can access their coupon code and make the discounted purchase immediately. In this case study by Sumo, a flavored water brand was able to generate over $300,000 in revenue from one popup with a 15% discount coupon offer.
Loyalty rewards: Loyalty programs are a great way for D2C brands to improve their relationship with customers and make sure they keep coming back. Loyalty rewards can include offers such as loyalty points, reward coupons, or a free product after a certain number of purchases.
Referrals: Referral marketing programs are a popular D2C tactic in which customers benefit from referring a friend to the company. An example of a referral tactic is to offer a cash bonus, such as $5, for every referral earned. Referral programs help retain existing customers while also promoting the acquisition of new customers.
Competitions: Interactive promotions, such as competitions, surveys, and quizzes, are also a fun way to attract customers and boost sales. D2C companies can offer discounts, special offers, or prizes to customers in return for user-generated content, social shares, and other customer engagement activities.
While a discount is a kind of promotion, other types of promotions can be more sophisticated sales and marketing tactics that D2C brands can implement at various points along the customer’s journey through the marketing flywheel.
Discounting is a relatively basic tactic — by slashing the price, the product becomes more attractive to customers. However, there are downsides, too. Reducing the price risks devaluing the product perception since people tend to associate higher prices with higher quality. Plus, the expected increase in sales volume is meant to offset the loss of revenue incurred by the discounted price. However, if sales don’t increase enough, the discount strategy can seriously eat into profits.
D2C retailers can use both discounts and promotions to boost brand awareness and sales. However, there are times when one method may be more suitable than the other. For instance, when there is excess inventory that needs to be moved quickly, offering a simple cash discount can work well. In addition, discounts can create a buzz when introducing a new product to the market and get it out to as many people as possible in the early stages.
Promotions tend to be a longer-term tactic that won’t necessarily deliver instant ROI but can have a huge payoff over time. Brands can use promotions to drive customer awareness, engagement, and loyalty, encourage repeat purchases, collect customer data, and build customer lists for future campaigns.
For D2C companies, offering discounts can be risky since it trains customers to expect lower prices all the time. The challenge for e-commerce retailers is to find other ways to connect and communicate with their target audience, like with promotions. Various types of promotions can do far more to engage customers and entice them to buy than a basic discount. With a range of discounts and promotions, any company can grow its brand and build customer relationships that last.
Originally published on January 23rd, 2020, last updated on June 16th, 2022.