By Christoph Gerber, CEO of Talon.One
With uncertainty the watch word of the moment, CEOs are taking a microscope to marketing budgets. So it’s no surprise that the World Federation of Advertisers (WFA) has found that 82% of CMOs report their budgets are under more intense scrutiny than a year ago.
Rising costs and stalling consumer spend are putting margins under growing pressure. This means the effectiveness and return on investment (ROI) of marketing activity have been thrown into the spotlight. Marketers must demonstrate not just the value of their activities, but also how these efforts translate into tangible customer outcomes and bottom-line results.
The temptation to resort to quick-fix solutions, such as blanket discounting, may be strong. But marketers must resist this siren call. Such approaches, while potentially effective in the short term, often lead to a dangerous spiral of shrinking margins and eroded brand value.
Instead, they need to play the long game, leveraging data effectively for personalised promotions, investing in the tech stack and developing a fully integrated incentives strategy.
If they do, marketers can demonstrate how innovation in marketing can drive broader company success in an uncertain market – and ultimately see CEO scrutiny turn to satisfaction.
The discounting death spiral
A perilous trap awaiting marketers in challenging times is an overreliance on discounting. This approach, while seemingly attractive in the short term, can become one of the costliest and most avoidable mistakes a brand can make.
When repeatedly applied at scale, mass discounts can do considerable damage – decreasing engagement, impacting brand reputation, and eroding margins. It risks turning businesses into glorified clearance shops by conditioning consumers, who may have previously purchased at full price, to expect discounts and to delay making purchases until the inevitable promotion lands. The proof is sobering: according to Boston Consulting Group, 30% of promotions drive negative ROI.
So, what’s the solution?
Targeted promotions deliver long term success
Enter personalised, data-driven promotions – the alternative to the discounting death spiral.
This smart and strategic approach to incentives gets results. As part of our recent study carried out by Harvard Business Review, among those businesses that have started personalising promotions, 94% say they are reaping rewards, such as increased sales (62%), improved customer loyalty (47%) and better customer experience (44%).
If delivered effectively, a tailored incentives strategy built upon personalisation will drive behavior change that will protect your bottom line, deliver long term loyalty, and drive up margins.
Better data: the bedrock for any successful incentives strategy
However, the path to personalisation is not without its challenges. Inadequate data and technology issues are primary barriers to personalising promotions and ultimately having a joined up incentives strategy.
In fact, according to the businesses surveyed in Talon.One’s study with Harvard Business Review, almost a third of those that are yet to personalise promotions cite issues with customer data as a cause. Almost a third (32%) face challenges such as siloed, inaccessible, or low-quality data, and the same amount report tech or software issues (32%).
Overcoming these obstacles begins with a fundamental step: data cleansing. By refining and organising their data, marketers can gain deeper insights into their customers, understand their needs and preferences, and unlock smarter targeting opportunities.
The integration opportunity
The ultimate goal for brands should be to develop an integrated incentives programme. This approach requires breaking down silos between marketing, digital, and technology teams to deliver tailored, data-driven promotions and incentives.
While brands are increasingly relying on tech teams to build the tech stack needed to unlock the power of personalisation, this isolated approach is hindering marketers from having a comprehensive overview of their own strategy and causing unnecessary frictions in the process.
Investing in integration is proven to pay off. Our survey with Harvard Business Review found that those businesses who have already partially or completely integrated promotions and loyalty strategies reported significant benefits: improved customer loyalty (60%), increased sales revenue (58%), and better customer experience (56%).
From vicious to virtuous cycle
Where mass discounting offers a vicious circle, integrated incentives programs represent a virtuous one – with more data, greater personalisation opportunities, and added value for businesses and their customers.
Unlocking this virtuous circle might require an investment in both resources and technology; marketers must hold their nerve and make smart, strategic changes that will reap rewards in the future.
Ultimately, switched-on marketers may find that the CEO’s scrutiny, once a source of anxiety, becomes a welcome catalyst for innovation. Now is the time to seize the opportunity to push the margin-growing potential of a strategic incentives programme up the boardroom agenda, to make sure the value is fully understood across the C-Suite.
