Latest / The Retention Marketing Podcast with Fexingo: Email, SMS, and Loyalty for Repeat Customers / How to Stop Discounting Your Brand Loyalty
Transcript
- Lucas: The hardest pill for a marketing director to swallow these days is that their best customer might be the one who never bought anything at full price. We look at retention dashboards and see a dip in average order value, so we reflexively hit the discount button. But today, I want to talk about why that reflex is actively destroying the very loyalty you are trying to build. Luna: It feels like we are training our customers to wait for a sale before they ever consider buying. If I have to wait for a coupon to justify a purchase, do I actually like the product or just the deal? Lucas: Exactly. And it gets worse because once that habit forms, you can never go back. A few years ago, a mid-sized outdoor apparel retailer decided to test this theory head-on. They had been running weekly flash sales across email and SMS to drive retention. It worked short-term, but their repeat purchase rate was flatlining, and their margins were getting crushed. So they did something radical: they turned off the discount engine entirely for their loyalty tier members. Luna: That sounds terrifying. Did their revenue crash immediately when the coupons stopped flowing? Lucas: For the first three weeks, yes. There was a visible dip in transaction volume. But here is the key metric they tracked next: the percentage of those transactions that occurred at full price versus discounted price. By month two, full-price conversions among their top twenty percent of customers had jumped by eighteen percent. They weren't losing customers; they were filtering out the deal-seekers who were costing them money on logistics and returns. Luna: So they essentially traded volume for quality. That requires a lot of confidence in the brand's perceived value to pull off without alienating the core base. Lucas: It does, which is why they didn't just stop discounting. They replaced the discount with something tangible that cost them less in dollars but felt more valuable to the buyer. Instead of twenty percent off a jacket, loyalty members got free garment repairs and priority access to new colorways. They shifted from price reduction to service inclusion. Luna: I love that. A repair kit costs them maybe five dollars in materials and labor, but to a customer who just bought a four hundred dollar jacket, that feels like peace of mind. It changes the conversation from 'how much does it cost' to 'what happens if it breaks.' Lucas: Right. And it builds a relationship that isn't transactional. When you offer a repair, you are inviting them into the lifecycle of the product, not just the checkout flow. That is where real retention lives. But let's take a quick breath here. If these conversations about smarter marketing and retention strategies have sparked ideas you've actually put into practice, we'd be grateful for your support. It helps keep this network ad-free and independent. You can find us at buy me a coffee dot com slash fexingo. Thanks for keeping the signal clear. Luna: Appreciate that. Back to the apparel brand though — did they measure how this affected their return rates? Usually, discount shoppers return items more often because the purchase decision was driven by impulse pricing. Lucas: They did. Returns dropped by fourteen percent in the same quarter. The logic holds up: people who buy at full price have done more mental due diligence. They aren't buying three sizes hoping one fits because it was cheap. They are buying what they need. The lower return volume also offset some of the lost revenue from the initial dip. Luna: That makes sense. Lower returns mean better inventory health and fewer reverse logistics headaches. It’s a cleaner operation overall. But how did they communicate this shift to their existing subscriber list without causing an uproar? Lucas: Transparency. They sent a straightforward email to their loyalty members explaining the change. The subject line wasn't clickbait. It was simply 'Our Promise to Quality.' They explained that they were investing in better products and longer-lasting relationships rather than chasing fleeting sales spikes. It framed the removal of discounts as a premium upgrade, not a penalty. Luna: I would have clicked that. Most brands apologize for raising prices or cutting discounts. This felt like a statement of intent. Did any customers complain publicly? Lucas: A handful. About three percent of the loyalty segment opted out or muted emails. But here is the interesting part: those three percent were the exact demographic that had the highest refund rates and the lowest lifetime value. Letting them go was a net positive for the business. The remaining ninety-seven percent doubled down on engagement. Luna: So the churn was actually healthy churn. They shed the weight that was slowing them down. This brings up a question about segmentation. How do you decide who stays in the no-discount club and who doesn't? Lucas: You don't treat all customers equally, but you also don't punish everyone for being price-sensitive. The brand created a two-tier system. Top-tier loyalty members got the full no-discount, high-service treatment. Second-tier members, who were newer or had lower spend history, still received occasional, smaller incentives like free shipping or early access to sales. It kept the funnel moving while protecting the margins of the core base. Luna: That’s a nuanced approach. It prevents the 'everyone gets a coupon' fatigue we see everywhere else. But what about competitive pressure? If their main competitor keeps running black Friday sales, won't customers drift away? Lucas: This is the critical test. During the last major holiday season, the competitor ran massive site-wide discounts. Our apparel brand stayed silent on price. Instead, they pushed a campaign around 'Gear That Lasts.' They highlighted user-generated photos of their jackets after two years of use. They leaned into durability. Their sales volume was thirty percent lower than the competitor's, but their profit margin was twice as high. They made more money with fewer units sold. Luna: That is a bold move. It requires a very different set of KPIs to report to the board. Most CFOs want to see top-line growth quarter-over-quarter. How did they frame this success internally? Lucas: They shifted the internal dashboard from gross revenue to net profit per customer and customer acquisition cost payback period. They showed that acquiring a customer through full-price channels had a faster payback time because there was no discount subsidy. Over twelve months, the lifetime value of a retained customer was significantly higher without the discount drag. Luna: It’s fascinating how much math is hidden behind the psychology of a sale. People think of discounts as simple arithmetic, but they’re actually complex behavioral triggers. Removing them forces a different kind of connection. Lucas: Exactly. And it works for digital products too. Think about software subscriptions. Many SaaS companies offer heavy discounts to reduce churn. But what if they offered extended onboarding sessions or dedicated account management instead? The marginal cost is time, not cash. The perceived value is high expertise. Luna: Yes! I’d rather have my implementation questions answered quickly than save ten dollars a month. Time is often more valuable to busy professionals than small monetary savings. It aligns with the pain point they are actually feeling. Lucas: That alignment is key. Discounts solve a wallet problem. Service solutions solve a workflow problem. Which one you choose depends on what your customer is actually worried about. If they are stressed about budget, a discount helps. If they are stressed about complexity, service helps. Most brands assume it’s always a budget issue. Luna: And that assumption is probably why so many loyalty programs feel hollow. They give points for spending, but points are just delayed discounts. They don’t add new value, they just defer the price cut. Lucas: Spot on. Points are lazy loyalty. Real loyalty is about making the customer’s life easier or better in ways that money alone can’t easily quantify. Like that free repair service. It’s not about the jacket anymore; it’s about the care. Luna: So the takeaway is to audit your retention tactics. Are you solving for price or for experience? And be willing to let go of the customers who only respond to the former. Lucas: Precisely. It takes courage to stop feeding the discount beast. But the brands that do it tend to build something much more resilient. They trade noise for signal, and impulse for intention. Luna: I’m curious if other industries will follow suit. Once consumers get used to value-added retention, will they start rejecting discounts as a sign of desperation? Lucas: We might already be seeing that shift. The fact that this strategy worked for a commodity-adjacent product like apparel suggests it has broad applicability. It’s worth watching which other sectors try this next year. Luna: It’s a good experiment to run. Even if you don’t go all-in, testing a no-discount cohort against a control group could reveal a lot about your true customer base. Lucas: Agreed. It’s low risk, high reward. You learn who really loves your brand, and you protect your margins while you do it. Hard to argue with that outcome.