The High Cost Of Discounts: Brands Are Overdoing It, Study Shows

Consumers crave discounts. And marketers are only too happy to provide them — 84.8% of retail brands plan to offer discounts via email during this Black Friday period. according to research by Yieldify.

But most retailers are going too far, judging by Discounts Across Industries: A Benchmark Report, a new study by RevTrax, a firm that provides an offer management platform.

RevTrax analyzed anonymized consumer behavior across millions of offers delivered over two years and compared them against the ideal for different industries as determined by views, redemptions, and the cost per unit moved (CPUM).

The result? It found that the average discounts being offered are way above the ideal for different industries.

For instance, the best discount for the food & beverage sector is 9%. But the average offer is 23%. “Food Marketers can dramatically reclaim their margins by moving towards the ideal discount of 9%,” the study says. 



In the pet sector, brands are offering an average of 18% — eight percentage points over the ideal. The result is a $3.88 cost per unit moved, versus an ideal cost of $2.10.

And Baby & Kid retailers give an average 20%, whereas the ideal is I1% — that’s where brands can gain higher margins and improved CPUM.

Baby & Kid marketers can be forgiven if they resist this idea — cutting discounts in half can affect revenue numbers at first. But “the amount of money saved will surpass the amount of revenue missed out on by as much as 5-10x at scale,” the study states.

Then there’s the health industry — it offers 16%, although the optimal percentage is only 10.50%. The average CPUM is $2.24, and the ideal is $1.65.

Meanwhile, the personal care business offers an average of 13%, compared to an ideal of 20%. Its CPUM is $1.04, and the ideal is $.96.

RevTrax suggests dynamic discounts fueled by AI.  

The study concludes that discounting less will improve stability in the long run. "Consumers won't rely on coupons and will stop associating the brand with lower values.”

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