Article9 Strategies For Shifting Customers From Promotion to Premium
When Black Friday (as we know it) became a thing in the 1960s, it was said that this date was when retailer’s ledgers went from “in the red” (i.e. losing money) to “in the black” (i.e., making money). Honestly, not much has changed in the last 60 years (yes, the 1960s were 60 years ago). Throughout my career, I’ve had the opportunity to work with many retail / eCommerce brands, and virtually all of them relied heavily on Black Friday / Cyber Monday (BFCM) to hit their annual targets.
The same story is true for many non-retail B2B or B2C businesses – the only difference is the “event” – home service brands typically run Spring + end-of-Summer deals, Senior Care thrives after the Holidays, the fitness industry’s Super Bowl is Q5 (i.e. the 10 days after Christmas) through early January, enterprise SaaS + B2B groups typically run end-of-year + end-of-fiscal (i.e. June 30) deals, etc. Virtually every industry has a few “moments” in their business calendar when prospects are more eager to buy and/or when businesses offer better deals.
Across all of these brands + industries, I’ve noticed three trends following these “sale” periods:
- Most brands spend an inordinate amount of time, money and energy promoting their discount/sale/offer, and comparably little on anything that follows it. All of the attention is on the sale, and what comes next is an afterthought.
- The cohort of customers acquired during “promotion” period tends to under-perform other cohorts in terms of both loyalty and lifetime value unless strategic intervention occurs
- The approach required to shift these customers from “promotion” to “premium” is radically different from what most brands have in-place.
All of that leads to the “fatal five” negative impacts in the days, weeks and months that follow the “big sale”:
- Margin Compression: sale-or-see-ya purchasing behavior spikes among promotion cohorts. This is where customers only return during subsequent major promotion events, resulting in a brand needing to either (a) continually offer discounts/promotions to retain these customers or (b) accept significantly lower lifetime value from these customers, as they churn at a much higher rate absent follow-on incentives. Both options result in margin compression and additional strain on the business.
- Feast-or-Famine Cycles: huge inflows of new customers during promotional periods place massive stress on the entire organization’s operations – whether it’s sales teams that are flooded with new prospects, or operations teams trying to manage inventory, or customer service/support/success (or whatever we’re calling them) trying to onboard far more customers than normal. This is further complicated by the reality in (1) above – the customers acquired during the “feast” aren’t as valuable as the ones acquired during business-as-usual periods – leading to a situation where the brand needs to staff up to handle the “feast” period, but can’t rely on the yield from that period nearly as long. The solution tends to either be to accept increasingly volatile revenue patterns (risky) or to lean in on more discount periods in an attempt to smooth top- and bottom-line performance.
- Customer Behavior Adaptation: Customers – whether B2B or B2C or B2G – all have the same tendencies: they’ll develop “promotional addiction” (they’ll wait for another sale rather than purchase a full-price product/service) and “value normalization” (presented with consistent discounts/promotions, customers will “adjust” their perceived value of your product/service to meet the “sale” price).
- Brand Equity Erosion: for the brands that choose to offer more discounts, the inevitable result is a decline in brand equity as customers adjust their perception of the company’s value. This bleeds into non-promotional customer segments, who feel that either (a) they missed out on a deal and should wait before making future purchases or (b) that this brand is no longer exclusive/premium, and thus not for them. This is further compounded by an increase in negative reviews and customer service issues (price sensitive customers love to complain), which further hinders efforts to obtain full-price/premium cohorts.
- Decline in Market Position: each of these factors makes it more difficult for the brand to compete on a go-forward basis – margin compression stifles innovation and tends to result in cost-cutting measures elsewhere; more price-sensitive consumers wait for discounts and try their damndest to extract maximum value from each interaction with the brand, and competitors seize the opportunity to either (a) undercut the brand on price or (b) jump ahead from a perceived quality/exclusivity perspective.
If you’ve worked with/for/in any brand that offers substantial discounts/promotions, I’m sure some (or all) of these ring true. This isn’t to say that all discounts are bad (they’re not) or that every brand that offers discounts/promotions is destined to end up broken and alone on a proverbial Island of Misfit Brands (they’re not). There is a way to thread the needle – to leverage these promotional moments to compel a significant number of prospective customers to buy AND to transition those customers from promo to premium while minimizing loss.
Shameless plug: if you’re interested in alternatives to traditional discounts, I’d check out this article.
Tactic #1 – Immediate Value Correction:
Think of customers acquired during promotional periods as you would in an emergency: the first 72 hours are critical. You should have immediate, rapid-response welcome journeys that (1) assert and validate your brand’s premium position in the marketplace, (2) educate/inform your newly-acquired customers about the brand, and (3) congratulate your new customers on timing their purchase advantageously with a particular emphasis on how rare/uncommon it is to obtain your product/service at this price. This third point is absolutely essential: you want your customers to think that their skill/intelligence/resourcefulness/luck are the reason they got a deal, not that your brand gave it to them. If you need inspiration, look at how Vegas casinos interact with customers who win money: they celebrate them. They emphasize how rare it is for a gambler to “beat the house.”
If done well, this will be a SIGNIFICANT deviation from your typical, business-as-usual post-purchase experience. Do not be afraid to send more emails or texts, or to include multiple forms of content (video, personalized support, downloadable guides/resources, images, etc.). Your overriding objective during this period is to demonstrate why thousands/hundreds of thousands/millions of customers have happily paid full-price for your brand’s product/service – and reinforce that it doesn’t happen often.
Tactic #2 – Value-Add Ons:
As you’re re-establishing premium status with your promo cohorts, identity opportunities to “add on” full-price products/services – concierge support, product/service upgrades, expert consultations, private appointments, exclusive event access, etc. This creates both opportunities for relationship cultivation AND to “earn back” some of the margin given away on the initial promo, all while severing the “discount-only” perception before it can fully form.
In the event you don’t have a wrap-around service, consider offering bundles after the purchase – most [brand] customers buy [thing customer purchased] with [X and Y]. Add those now with one click for $X OR offering upgrades – make this holiday truly magical and upgrade [thing they bought] to [premium version] for $X.
The bundle/upgrade breaks the discount habit (most customers are terrible at math), while the service/support pathway transitions the relationship from one based exclusively around price to one that tempers cost with value.
Tactic #3 – Tiered Price Normalization:
If you’re worried about going from a deep discount (i.e. BFCM) immediately back to full price, create a few “moments” following the deep discount where customers can obtain better-than-normal offers.
The trick to making this work is to restrict the offers as you reduce the discount, such that you’re pushing the “late-to-the-party” customers into the product/service pathways with the highest projected value to your brand. For example, a skincare brand might find (as many do) that trial kit purchasers tend to repurchase at the highest rate, and those re-purchases tend to be at full price (because the trial kit lasts longer than the promotion – usually by design). For a brand in this situation, the “big sale” might be 25% off everything for BFCM. The next tier up might be 15% off a select group of products for the 7 days following BFCM. The final “tier” is 10% off trial kits for 7 days following the expiration of the previous promotion.
The “tiered” strategy creates multiple “buying” moments, while capturing additional prospective customers who were on the fence (or simply overwhelmed) during BFCM with a better-than-nothing offer. The strategic design of the “tiers” pushes the follow-on customers into higher-margin/higher-LTV product/service lines, while reinforcing the positioning among the “best deal” cohort that they did, in fact, get the best deal.
This strategy can be combined with additional upsells/cross-sell opportunities, such as exclusive access to new releases (at full price) for customers who purchased during a promotional period – further pushing those customers back into the premium model.
Tactic #4 – Value-Based Price Anchoring:
Any brand that engages in significant promotions should have developed (preferably ahead of time) a content regime that demonstrates the value created by their product/service to the newly-acquired customer. The goal of this content should be to shift the focus from the absolute price (not a good place to play long-term) to the value delivered by the brand to the customer (a much better place to be). This can take many forms, but some of the most successful include:
- Category-Specific Value Calculators – let your customers see for themselves how valuable your product/service is to them. These help customers understand the value created by quality products/services.
- Peer Comparisons – help customers visualize how much more they’re getting from your brand vs. a competitor.
- Exclusivity Demonstrations – highlight how their purchase of your product/service puts the customer in an elite company. Showcase notable individuals/brands who also purchase from your brand, as well as other places the brand has been featured.
Interactive Value Demonstrations – integrate value demonstrations into your product/service. Both Instacart and Optmyzr (the PPC tool) do a wonderful job of this, reminding the customer of how much time and effort they’ve saved each time they use the tool. If you want to go even further, ask the customer for their salary, then convert the time saved into a dollar value using that information.
Tactic #5 – Exclusivity-Based Loyalty Programs:
While I loathe the “gamification” of everything, there’s a reason it’s everywhere: it works. You can tap into the human desire for rewards by creating a structured, invite-only advancement system that rewards full-price purchasing behavior with progressively-more-exclusive benefits. This shifts the perception of “premium” or “full-price” purchasing from a negative (“I didn’t get a deal”) to a positive (“this brings me closer to X status”). Airlines, casinos and luxury brands have used this model for decades (likely centuries for the luxury brands + casinos) – and it still works.
An easy way to implement this is to design multiple (usually at least 3, but preferably 5) “tiers” above standard customer status – you can make them generic (Bronze – Silver – Gold – Platinum – Diamond) or brand-specific (A – AA – AAA – Majors – World Series for a baseball brand). Then, layer on progressively more exclusive benefits that come with that status – whether it’s a number of purchases, a total dollar value, or something else:
Base: Cobalt (I picked a boring mineral, leave me alone) – no benefits.
- Tier #1: Bronze
- Requires 2 Full-Price Purchases or $500 in Total Purchases
- Unlocks early access to limited-edition drops
- Unlocks personalized product curation
- Tier #2: Silver
- Requires 5 Full Price Purchases or $1,000 in Total Purchases
- Unlocks Private Shopping Experience
- Unlocks One-on-One Consultation with [Someone Important]
- Unlocks a Personalized Product
- Tier #3: Gold
- Requires 10 Full-Price Purchases or $2,500 in Total Purchases
- Unlocks exclusive seasonal collector’s items
- Unlocks Private Shopping Events
- Unlocks Priority for a Future Product Drop
- Unlocks a ticket to a private event with the [Someone very important]
And so on and so forth. This structure also has a hidden benefit – it doesn’t discount. You’ll notice that each tier doesn’t give a discount code (we’re not GNC) or future savings; it gives things that don’t have a readily-accessible value. That shifts the relationship between the customer and brand from one that is exclusively denominated in currency to one that’s more denominated in value and prestige.
Tactic #6 – Premium Product/Service Cross-Pollination:
One of the great benefits of the “AI Revolution” is that it has democratized data science in a way that was unthinkable just a decade ago. It’s now possible to upload your customer + purchase database to Claude or Gemini or ChatGPT and have it run a journey/purchase path analysis in minutes.
This is particularly valuable if you can identify the promotional entry points (products, promotion types, etc.) with the strongest correlations to full-price customer status, along with the intervening steps that tend to result in full-price adoption. As a concrete example, a CPG brand might find that the sampler pack has the strongest correlation with full-price customer status, because people who find something they like in the sampler tend to come back and buy a full-size of that particular product. The brand might also find that 5 flavors of a snack tend to be most correlated with high LTV. Those two insights together might lead the brand to develop a “sampler” of those 5 high LTV flavors – then offer that at a promotional price.
The same logic can be used for B2B services (find out which things tend to result in high LTV, package a “lite” version of them together, then offer that “lite” package as part of your promo). The idea is to maximize the number of promo customers who enter on points that have a high probability of resulting in above-average value to the brand.
Tactic #7 – Propensity-Based Reactivation Campaigns:
If the first six of these have been logical, this one is spicy. Ditch the blanket reactivation campaigns. Instead, use propensity modeling (hello, ChatGPT or Gemini) to identify the members of your promotional cohorts who are most likely to purchase again, and focus all your efforts on that group. For the individuals who are NOT selected, run a “negative” campaign – send a short email series informing them that they haven’t met the threshold to be included in ongoing emails (which are reserved for premium customers), and they’ll be removed from the list on [a date in the very near future]. I would close it with a message that’s (essentially) we look forward to welcoming you back once you’ve reached full customer status (outline the criteria).
It’s a breakup email before the relationship starts – but you’re playing with house money. If the propensity model was anywhere near correct, the future value of most of these customers is near-zero – but the combination of a pattern-breaker (how many brands send break up emails right after a first purchase) and people’s aversion to both conflict and rejection (yay childhood issues) will turn some of those zeroes into heroes.
Tactic #8 – Non-Traditional Content Monetization:
Another favorite, especially for B2B brands: make your high-value, gated content work for you. Instead of offering premium content for a price or with a purchase, require activity to access it. This might be using a tool in order to unlock a guide, or providing additional information about your business in order to attend a webinar or read a report.
The trick here is to make the information/activity required BOTH (a) something that your ideal customer target will have readily accessible and the lookers will find off-putting (for instance, most executives know revenue numbers, employee counts, budgets, etc.; most middle-managers or lookers won’t have those numbers) and (b) something that helps your sales team deliver a better experience.
Once again, this can be adapted to a B2C or retail environment – if you want to access a virtual private consultation, you need to do X or Y. If you want to shop an exclusive drop or be invited to the virtual premier of the new collection, you need to do Z.
Each one of these interactions builds the relationship between your brand and the customer, while moving the relationship from a place of price sensitivity to one centered on value creation, expertise and exclusivity.
Tactic #9 – Loss Aversion Engineering:
another “spicy” tactic: a few days after the promotion ends, send your promo customers an email or notification alerting them that they have been granted “premium” status, which expires in a finite period of time. Highlight the benefits they’ll receive as a result of their status – then deliver on them. Right up until the expiration date.
This has multiple advantages for the brand:
- Giving the customers the premium status, without their having to do anything, creates a feeling of ownership of the status. This sense of ownership is exactly what drives those same customers to do more to keep it, as losses (even of things we didn’t pay for) loom larger than gains (including potential savings).
- Offering multiple benefits – for instance, app access, advanced analytics, private shoppers, one-on-one consultations, priority support, etc. – allows the brand to identify which one(s) are used most frequently, thereby providing the data necessary to structure future retention programs.
- The removal of those benefits (gradual or all-at-once) provides another trigger point to reactivate the customer that is detached from the initial purchase/service.
For instance, a fitness brand might offer 90 days of Premium Status or App Access. Over the next 90 days, the brand provides this customer with wonderful benefits – advanced tracking, priority support, personalized recommendations for diet, healthy recipes, workout generators/tools, etc.
Every 30 days, the brand generates a custom report for the customer on their usage of the premium features – along with either a “FOMO” message (i.e. the customer hasn’t used the features – they’re missing out and losing money) or a “It’s Going Away Soon” message (i.e. the customer is using this all the time, and losing it would negatively impact their fitness journey). The brand can then offer the customers who are actively using the premium product/service pathways to retain the status – either additional purchases, upcharges, etc. This increases customer engagement, loyalty and value – all while providing the brand with the data necessary to re-engage and delight the customer.
Each of these 9 tactics leverages both data and human tendencies to subvert traditional discount psychology and create new value frameworks that make full-price purchasing feel like gaining something beyond the product/service itself. Discount customers do not have to be inferior to business-as-usual customers; you just need to think differently about how you engage with them, in order to move them from promo to premium.
Cheers,
Sam
