Research involving Durham University Business School reveals how retailers target customers most likely to spend more.
Shoppers who take a more carefree approach to spending are more likely to receive personalised discount codes from retailers, according to the research..
The study involved Dr Arezou Ghiassaleh from our Business School, alongside Professor Amanda Jiang from Newcastle University Business School and Ji Yan from the University of Galway.
Customer behaviour
Their research examined how "spend more, save more" promotions influence customer behaviour and retailer profits.
The researchers found that some consumers spend substantially more than the minimum amount required to unlock a discount, while others stop much closer to the spending threshold.
These can include promotions such as "3 for 2" deals or discounts like "save £10 when you spend £50".
Two distinct shopping styles
To better understand how minimum purchase requirement discounts affect purchasing decisions, the team analysed data from a leading UK supermarket chain.
They examined the impact of these promotions across a range of fast-moving consumer products.
The research identified two broad groups of consumers: cautious shoppers and carefree shoppers.
Cautious shoppers tend to spend only slightly above the threshold needed to qualify for a discount. In contrast, carefree shoppers often spend significantly more than the required amount.
The findings suggest that carefree shoppers generate greater profits for retailers because they continue spending well beyond the discount threshold.
As a result, they may generate greater revenue for retailers when minimum purchase requirement promotions are used.
The researchers say the results demonstrate how retailers can use customer behaviour data to tailor offers to consumers who are most likely to increase their spending.
Discounts do not work for every product
The researchers also found that the effectiveness of these promotions depends heavily on the type of product being sold.
For so-called "preventive" products, such as sun cream, insurance, helmets and health supplements, spend-more-to-save-more offers had little impact on consumer spending.
In contrast, customers were much more likely to exceed spending thresholds when purchasing "promotional" products, including cosmetics, soft drinks, jewellery and experience-based purchases.
The findings suggest that some businesses may benefit more from personalised discount campaigns than others, while providers of preventive products may see little return from such promotions.
Helping retailers make smarter decisions
The researchers believe their findings can help businesses improve how they target promotions and personalise offers.
The insights also provide retailers with a better understanding of how different customers respond to discounts, helping them make more effective marketing decisions.
