Discounting vs. donation incentives: which is right for your brand?
Discounting may seem like a tried-and-true tactic for driving online sales, but there’s a growing community of industry professionals challenging this idea. Recent data suggests selling products for a discounted price can actually degrade the value of your brand. As a result, some brands are seeking alternative ways to incentivize purchases.
On a recent episode of the Own Your Commerce podcast, Bold Co-Founder Jay Myers interviewed Andrew Forman, Co-Founder of Givz, a new Shopify add-on that is truly disrupting the discount. The Givz mission is clear: Create Donation Incentives to Drive Sales without Discounts.
For example: “Spend $100 and we’ll give you $20 to donate to charity.”
To be clear, Forman doesn’t think you should never have a sale again. Givz has been developed as an alternative to discounting that still drives conversions while speaking to today’s conscious consumer.
Let’s look at some key reasons why this may be the right approach for your business.
Discounting can degrade your brand
Today many business professionals and entrepreneurs are wondering: Will discounting hurt my brand?
Profitwell’s Patrick Cambell, who appeared on the Own Your Commerce podcast in Season 1, says the higher the discount, the lower the LTV (customer lifetime value).This is based on data from over 4.2k subscription brands and makes a compelling case against over-discounting.
Forman said he has also seen a lot of studies where continuing to discount ultimately degrades the relationship between the consumer and the brand; the customer is trying to get the lowest price possible and it becomes a race to the bottom. So while discounting may get customers in the door with an initial purchase, they may be less likely to become loyal, longtime customers as brands are unable to keep up with consumers expectations while maintaining healthy margins.
On the other hand, Forman has observed brands offering donation incentives have customers that are more engaged and are quicker to become repeat purchasers. They are higher lifetime value customers — one case study saw a 22% increase in NPS score for people that donated versus people that did not.
What Forman has noticed since launching Givz, is that donation incentives cause customers to be more engaged and increase the likeliness of become repeat customers.
Donation incentives can outperform discounts
The idea that over-discounting can degrade a brand is nothing new for marketers. Discounts have long been seen as a quick-win approach that won't necessarily guarantee customer loyalty or repeat purchase behavior. There’s a reason most premium brands rarely discount, and when they do it’s by small amounts or for special occasions.
One surprising finding Forman has noticed since launching Givz, is that the donation incentives brands are able to offer are actually outperforming discounting in terms of conversion rate and overall revenue.
Forman said, “we went in with the hypothesis that we could perform just as well as discounts and what we have come out on the other end finding is that oftentimes we are outperforming discounts…We actually tried a 50/50 AB test with tens of thousands of emails where half the email list got a 30% off coupon code, and the other half the email list got a 20% off coupon code, plus 20% to give back to a charity of their choice, and it converted in terms of revenue output 58% better.”
These results may be linked to the rise of conscious consumerism as customers look for ways to make a positive difference with their dollar.
“We believe that everybody, every brand will need to be using Givz in the next five years, and the main reason is because consumers are changing.” - Andrew Forman, Co-Founder and CEO, Givz
Donation incentives appeal to today’s conscious consumer
More than ever today’s consumer is motivated by decisions that will have a positive social, economic, and environmental impact. Slogans like “locally produced” and “ethically sourced” have become fixtures on just about every type of product, particularly across food and beverage verticals.
Another study suggests as many as 88% of consumers would like brands to be more environmentally friendly and ethical.
For Forman it all comes back to the importance of personalized purpose — the idea that a brand with purpose is a profitable brand.
“That is where I Givz comes in and that's where personalized purpose comes in. Personalized purpose is going to be the message of the future and Givz is personalized purpose, and that is what I'm excited about.”
Are donation incentives enabled by Givz right for your brand? If you’re considering this tactic you’ll want to check out the full conversation. Download the full episode or click below to start listening now.