During the 1970’s and 1980’s, it was commonplace for businesses to pursue a 'market share strategy'. This would encourage price discounting and promotion driven marketing tactics – with short-term results. The outcome attracted deal seekers that shopped based on coupon promotions and ‘best offer’ retailers.
That meant, if a business could afford to undercut its competitor and encourage buyer switching, it would result in a greater share of the market relative to the competition.
But in today’s environment, it can be hard to sustain a market share strategy, purely because your customer has so much choice. Online and offline.
Conversely, it’s not sustainable long term to continuously discount your regular customer base, or discount to a customer which was always going to visit.
Instead, utilising a customer loyalty driven strategy delivers longer benefits over your customer lifecycle.
See the key differences in both approaches below:
For example, during the 1980’s, three major coffee retailers had a majority share of the market – Folgers, Maxwell House, and Hills Brothers.
With all merchants competing on price and coupon promotion, a battle ensued which forced all players in the market toward a price war. The result was disastrous for manufacturers and profits diminished during this period.
By turning the industry, and their business into a commodity market, it left little opportunity to discuss or engage with customers at a branding or loyalty level.
This left the market open for new competition. A small coffee retailer, by the name of Starbucks, launched, offering customers a coffee experience rather than a commodity product. Most people are aware of the success story which followed.
As this illustrated, misused sales promotions, which focus on heavy discounting or ‘deals’, can turn your loyal customer base into a price-sensitive buyer. Focusing your business strategy on the long-term benefits of developing customer loyalty yields a longer lifetime value and avoids price competition, for short-term gains.
For modern retailers, this means 'staying the course' of your marketing fundamentals.
- Product and offering
- Pricing relevant to your market demographic and elasticity
- Promotions that reward and entice, rather than devalue
- Programmes in place which create repeat purchase and experiences, rather than single visit discounting
If you’d like to learn how to compete on price while ensuring you’re creating and developing a loyal customer base, see how our customer acquisition feature, promotes your business without attracting ‘deal seekers’.