Maintaining brand reputation in recession

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Friday, 03 July 2009 03:12

Take note of the discount focused shopper, but maintain your brand reputation.

With the recession in full-swing and high street sales continuing to tumble, the last 12 months have seen consumers turn to online shopping in their droves.

In a bid to uncover the best online savings, cost conscious shoppers are becoming increasingly web-savvy and their purchases more influenced by discounts.

This shift in behaviour has caused the popularity of voucher and promotion sites to soar. But with budgets continuing to tighten, and brand loyalty becoming less important to consumers, what strategies can retailers apply to best respond to these trends, whilst continuing to drive sales and meet the requirements of the cost conscious recession shopper?

Research findings

At LinkShare, we recently carried out an in-depth research study with analyst house Penn Schoen & Berland Associates which looked into the changing behaviour of online shoppers in light of the economic downturn. We found that the drive to make savings combined with the sheer number of discounts now available online, has resulted in the internet becoming an increasingly trusted research tool by shoppers on a budget. Of 1,000 consumers surveyed, 92 per cent reported having more confidence in online information about products than advice from shop sales assistants, and 81 per cent said they now conducted internet research before buying a product in order to obtain the largest saving possible.

Most significantly, our research identified the emergence of a new kind of consumer – the Recession Shopper. Recession Shoppers are people who are transferring a large quantity of their retail spend online to mitigate an increasingly challenging economic situation. Despite Recession Shoppers feeling the pinch of the downturn, they do not intend to stop spending, but instead aim to ensure they are spending more carefully.

Vouchers and price comparison sites

The range of research tools and review sites now available online allows consumers to compare their experiences to others whilst enabling them to have confidence that they are securing the best value for their money. Three quarters of our respondents used price comparison engines and two thirds admitted using professional review sites before making purchases. For the Recession Shopper, voucher sites have become especially important. Our research found 43 per cent have purchased a product online that they wouldn’t otherwise have considered after finding a discount voucher, and 26 per cent of respondents said that they have subscribed to receive email alerts from voucher sites.

The importance of online shoppers for retailers

The value of internet purchases has become an essential revenue stream for retailers. Nineteen per cent of Recession Shoppers plan to spend more online this year than last and this was despite expecting to decrease their overall spend. With the downturn dragging on and consumers clinging to frugality, more retailers are finding they need to mark-down their goods to encourage customers to make purchases. Our research shows that this is especially true online where increasingly consumers are becoming deterred from buying anything unless it is reduced. This is illustrated by the high double-digit percentage discounts and promotions available on voucher code sites, which are now an integral part of a Recession Shopper’s strategy to make savings.

The challenge for retailers

During the early stages of the economic downturn, many brands began offering large discounts and vouchers to entice customers and sustain business during what they hoped was a temporary blip in sales - whilst other brands resisted promotional campaigns for fear of damaging brand reputation. But with the downturn turning into long-term recession, many brands can no longer afford to continue to offer huge discounts, whilst at the same time are under pressure to remain competitive. This is compounded by shoppers becoming accustomed to not paying full-price, with their online purchases increasingly dictated by where they can find the best deals. The challenge for retailers now is to ensure that they remain competitive, whilst protecting their profit margin and brand reputation.

Voucher and promotion strategies

If vouchers are used tactically they can drive traffic to the site and encourage customers to continue spending. Retailers need to indentify and inspire their most loyal customers, with exclusive rewards that stimulate purchases whilst still maintaining the brand values. At the same time, retailers must learn to use voucher sites to increase revenue or solve the problem of unwanted stock. This is where a partnership with a well-managed affiliate network like LinkShare can drive strategy and success. Affiliate networks assist brands in understanding how and where voucher sites can be most effective, for example, how they increase average order size, or promote new products.

The tone and content of promotions that retailers offer also make a significant difference to how a brand is perceived by shoppers. Retailers should consider carefully what kind of offer they promote – for instance, a free gift for orders of a certain value might incentivise consumers to purchase without creating the expectation of future discounts on the core products. This addresses the concern of some brands that by using voucher sites they are teaching consumers to buy only on a discount.

Conclusion

As the recession continues, voucher sites meet a clear demand from the credit-crunch conscious end user. Although brands are often cautious about embracing new marketing methods, they need to be smarter and more efficient in today’s challenging economic climate. There is a fine line to be drawn; voucher sites and promotions should be regarded as value-add rather than a solo focus, but have a valuable role to play in a wider online campaign. Retailers need to protect their profit margins by reducing the amount of discounts they offer and by promoting innovative and quality products that have clear USPs. Discounts should be reserved for attracting new customers, or in line with specific campaigns or promotions. By being smarter with online strategy and more tactical with promotions, retailers can remain competitive and set themselves up to return to the marketplace fitter and stronger when the economy recovers.

Tags: SME marketing SME sales SME affiliate SME network

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