The Discount Dilemma: Do Promotions Build Loyalty or Just Train Deal-Hunters?

The Spark: Stumbling upon a Game-Changer Article

I came across this article, 'The Psychology of Discounts' by Chris Stoyles, purely by chance, and I'm glad I did. I'd never heard of the author before, but as the CEO of Last Yard and with years of experience in retail tech, he clearly knows what he's talking about. The piece delves into the psychology and sociology of how consumers react to bargains and discounts. I'd highly recommend reading it — it's eye-opening. But what truly hit me and got me excited was this line: 'Discounts train consumers to expect them when making a purchase.' Wow! I hadn't really thought about it that way before, but it's so true.

In my mind, discounts have always been the wild card that companies use to attract new customers and build loyalty with existing ones, all with the aim of boosting sales. However, once you've offered a discount, it sets a precedent. Customers start waiting for the next campaign to get things at a reduced price.

Discounts create dependency and routine. With the internet and endless research tools at their fingertips, customers can compare products and prices to find the perfect match for their needs at the lowest possible price. This has sparked a war among competitors to launch the most aggressive campaigns first. That's why we see Christmas adverts in October and Halloween promotions before the end of summer. It's a battle to see who can create the biggest and fastest bargain to pull in the crowds.

So is it no longer about quality or value? Is it just about urgency now?

It's a fascinating article, but bringing it back to my own world as a CX consultant, I've always seen discounts as an effective strategy for increasing loyalty in the short term. But by targeting discount-seekers, are we really building loyalty with the right customers? Is my company selling urgency, or is it selling quality and value? That's the question we need to ask ourselves.

If the answer is quality, should we ditch discounts and promotions altogether? How can we boost sales to acquire new customers and retain existing ones without conveying a sense of urgency if that's not our brand?

The Upside: Why Discounts Can Still Be a Loyalty Booster

But let's not rule it out just yet. When done right, discounts have their place. They play on our desire for a good deal, creating that sense of FOMO (fear of missing out) that encourages people to buy now rather than later. Studies show that personalised discounts, tailored to what customers actually want, can make them feel seen and valued, discouraging them from switching to a different brand. For VIPs or loyal frequent flyers, free delivery for life or exclusive perks aren't just deals, they're rewards that say, 'We appreciate you sticking around.'

In my experience of working with clients, I have seen moderate discounts (10–20%) lead to larger purchases and repeat visits without making customers mercenary. They foster initial goodwill, making customers feel that the brand understands them. In competitive spaces like e-commerce, a well-timed promotion can cut through the noise and attract new customers who may become long-term patrons once they experience the quality first-hand.

The Downside: Training Customers to Chase the Next Deal

But here's where it gets tricky — and where Stoyles' point really hits home. Discounts can encourage customers to wait for the next sale, reducing the value of full-price purchases and cheapening your brand in their eyes. If everything's always 'on offer', why pay full price? It encourages deal-hunting behaviour, meaning loyalty shifts from your product to the discount itself.

I've seen aggressive campaigns lead to margin squeezes and dips in quality just to keep up. Competitors undercut, and suddenly it's a race to the bottom. With tools like price trackers and comparison sites, customers are savvier than ever — they'll leave for a better deal elsewhere.

Have you ever noticed a price reduction on a product you've just bought at full price? It makes you feel like a fool, doesn't it? You might even have returned it and then bought it back at the reduced price. How is that experience going to make you a satisfied, loyal customer?

Are we creating loyal advocates who love our brand, or just temporary mercenaries hooked on the thrill of a bargain? If urgency becomes your brand's defining feature, it may distract from the genuine quality you're offering. So, if we're not happy selling urgency, what actually moves the needle?

Alternatives: Win-Win Ways to Boost Sales Without Resorting to Discounts

So, if discounts feel like a double-edged sword, what should you do? The aim is to increase sales and customer loyalty by offering lasting value, without making customers dependent on sales or creating a sense of urgency.

One solid alternative is to offer bonuses or freebies instead of straight price cuts. Research shows that shoppers love "extra free" items and buy far more than they would with equivalent discounts because it feels like a gift, not a bargain. For instance, you could bundle a complimentary accessory or upgrade with a purchase to add perceived value without reducing your core price.

Another option is personalisation, which is my personal preference as I sense the CX world is clearly moving in this direction. Customers increasingly appreciate tailored experiences, not just good prices. Use customer data to make relevant recommendations, offer early access to new products or provide customised experiences that make customers feel special. This builds emotional bonds, as discussed in my post on building emotional connections.

To encourage customer loyalty, offer non-price perks: Examples include exclusive events, priority service and community forums where customers feel part of something bigger. In tourism or retail, offer unique experiences without reducing prices — it maintains the premium feel.

Don't forget the human touch either: empathetic onboarding, quick resolutions and staff who remember names. These create 'white-list' memories that keep customers coming back for the emotional connection, not just the savings.

The Bottom Line: No Easy Answers, Just Tough Questions

Discounts can attract and retain customers, but they can also encourage them to look for the next big deal. They create a sense of urgency and boost sales, but they also risk creating price-conscious customers rather than brand advocates. Alternatives such as bonuses, personalised perks and genuine value can lead to mutually beneficial growth, but the most suitable approach depends on your brand, industry and customers. If quality is important to you, it might be time to review those promotions: Are they building loyalty or merely ingraining habits?

References

Stoyles, C. (n.d.). The Psychology of Discounts. Last Yard. Retrieved from https://lastyard.com/the-psychology-of-discounts/.