What will inspire consumers this holiday?

Credit use is down, along with retail sales. Retailers have had to be creative in finding ways to get customers in the door. Our experts assess how to best appeal to consumers in this tough economy.

Lars Holmquist
CMO, Vesdia Corp.
Twenty years of experience in cards and loyalty industry

Most forecasts say holiday sales growth is expected to be relatively flat as the economy continues to contract and consumers tighten their purses.

In this environment, a combination of price and shopping incentives will inspire consumers. The most popular tactic to get folks in the door right now is straight up price-slashing, with unprecedented sales in-stores along with online specials/promotions. However, consumers also have a high awareness of shopping incentives provided by their credit or debit cards generated by making purchases at participating merchants.

Clever shoppers can combine the benefits of sale prices with incentives sponsored by their cards.

While some experts claim that cash is most likely to be king this holiday season, driven by the overextended nature of consumers and their credit cards, there is a growing case that merchant-funded reward programs may motivate consumers.

While nearly 80% of all credit cards today are tied to some form of rewards program, consumers are now seeking higher-value programs where their purchases at participating merchants, give them the opportunity to earn anywhere from four to 10 times the average reward rate.

Expect strong increases in reward program redemptions, price comparison shopping and bonus earnings from consumers who are looking for their wallets to work harder for them. Marketing professionals that help consumers find the best deals will have plenty of takers.

Don Ryan
Senior partner, iKnowtion
More than 20 years of experience in marketing

This holiday season, consumers are going to need a real incentive to get into the spirit of gift buying.

Already, retailers have braced for the weakest sales in many years. If you are a retailer, perhaps the best that can be hoped for is that you don’t give away more discounts than is necessary to motivate consumers to purchase.

Those companies that have already figured out how to optimize their use of incentives to drive sales will protect themselves somewhat, and have a leg up on their competition. More specifically, this implies avoiding a one-size-fits-all approach to discounting, which can be unnecessarily costly, and instead price discriminating among consumers – making the minimum offer to each individual consumer that will  motivate him or her to purchase.

To develop this capability the retailer would need to have a differentiated view of its customer base, say, through segmentation analysis and have done a fair amount of in-market experimentation to ascertain how different consumers react to different incentive offers.

<a href="http://www.buzzdash.com/index.php?page=buzzbite&#038;BB_id=137898">What is your company relying on to drive sales this holiday season?</a> | <a href="http://www.buzzdash.com">BuzzDash polls</a>

Statistical models could be constructed to identify the optimal offer for each customer. Of course, with time running out before the holidays arrive, this work would have had to been done months ago. However, if retailers are nimble enough, they can still use this season to run the experiments to create the data needed for this analytic capability to be built. Think of it this way: If sales are going to be down, you might as well learn something useful in the process.

DMNews’ Decision
Holmquist says price slashing and merchant-funded reward programs may inspire consumers. While this is a chance to step up deals, Ryan says that segmentation analysis enabling retailers to identify optimal offers per customer, means this is an opportunity for the future as well. What are you doing to inspire your customers this season? Vote online at DMNews.com.

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