Discount Loyalty

Couponing is huge. Shows like "Extreme Couponers" have made clipping the Sunday paper trendy and countless Twitter accounts and blogs troll the interwebs looking for the next deal. Throw a recession on top of couponing being 'trendy,' consumer purchase behavior is largely based on couponing. So if purchase behavior is driven by couponing, it's an effective marketing tool correct? If a brand offers the best deals, they'll have the most loyal followers right?

Not necessarily.

Conditioning to Deals

Last week at SocialFresh, fellow Engauge teammate @ratpack gave a great talk on brand loyalty. One of his main points included not conditioning your consumers to discounts. He elaborated in his talk saying that people will become loyal to discounts - not to your brand. Don't believe him? Last week a couple of ladies from our DIG team attended a couponing class led by a woman who is a big deal in the online coupon space. What were here main words of advice?

"Don't be brand loyal."

Yep. So does that mean that what brand loyalty is left over will go to the lowest bidder? Not necessarily. Does that mean couponing is a detriment to all brands? That's not always the case either.  Let's take a look at two different retail stores as an example of discounting vs brand loyalty.

Wal-Mart vs Target

Let's take a glance at the two biggest retail chains out there right now. Both offer similar selections of products. However, Wal-Mart's prices are almost always lower due to their overwhelming commitment to have the lowest prices. Their success is built on being able to use mass scale to undersell their competition.

Now look at Target. Their prices are reasonable and inexpensive but will sometimes sell some products higher than Wal-Mart. However, I would be willing to guess that they have a higher brand affinity and have more loyal fans to their brand than Wal-Mart does. This could be attributed to things like brand positioning, good PR and most likely - the overall in-store experience. Target doesn't have to undersell every time to bring people in. Many people will actually choose to pay a couple of dollars more to have a better customer experience at Target than to go to a Wal-Mart.

Interestingly enough, while I was living in Chicago, there was always an ongoing battle by the communities trying to keep Wal-Mart out of the city. At the same time, Targets were popping up all over different neighborhoods and hardly anybody uttered a complaint. What could that say about Wal-Mart discounting for brand loyalty? People are loyal to Wal-Mart's discounts but some more loyal to Target as a brand. At the end of the day, which store wins?

With the recession and couponing trends, the concept of brand loyalty will struggle to survive. What do you think the future of brand loyalty will look like? How will discounting play a role?